A recently released survey by Knight Frank of prime residential markets shows that the growth in the Prime International Residential Index (PIRI) in the 100 top locations for luxury houses worldwide saw a decline in growth for 2016. Values for 2016 went up 1.4% with the cities at the top of the list being in China, New Zealand, Canada and Australia then followed by Lagos, Nigeria and Moscow, Russia. A year earlier the growth overall was 1.8%.
One nation that has risen in the top tier is China, with the cities of Beijing, Guangzhou and Shanghai topping the list and having surpassed 26% year-on-year growth.
Data by PIRI also showed that for the year 2016, 61% had either flat or a rise in prices for luxury home markets compared to 66% for 2015, thus knocking Vancouver off its 2015 top location spot.
A 15% tax on foreign buyers was introduced in British Columbia last August which up to that point Vancouver had seen robust luxury residential sales. Prime property prices had increased by 25% in 2015 but only saw an increase of 15% for 2016.
International prime favourite London declined in the PIRI analysis with prices falling 6.3%. Reasons for the decline include the 3% levy for stamp duty for additional homes in 2016 and the June 2016 referendum vote to depart from the EU.
For its part, New York prime luxury was down thanks to the increase value of the US Dollar for international buyers and new properties being brought in to the market leading to higher available supply for buyers. Speculation by the Knight Frank report is that the New York market may have a brighter 2017 thanks to expected infrastructure construction, fiscal stimulus and reduced regulations by the Trump administration.
Hong Kong has seen its growth increase 2.1% in 2016. A tax increase in the stamp duty rate now puts it at 15% for residents as well as non-residents. The stamp duty had been 8.5% for residents and was part of series of measures introduced in 2010 to try and cool inflation in the already expensive housing market.
The rest of the market in China has seen price growth of 30% year-on-year in the luxury market which as Knight Frank points out is not ‘uncommon’ in these markets.
‘New cooling measures, including higher deposit rates and home purchase restrictions, have already been introduced in some cities in the hope of both slowing the rate of growth and deterring speculative demand. By the final quarter of 2016, these were beginning to take effect.’
Guangzhou witnessed a 27% increase in growth and is now ranking with Shanghai. However, luxury home prices in Guangzhou are almost half of those that are available in Shanghai.
Other locations in the report similar to Guangzhou can be found in Amsterdam and Seattle where sales of prime luxury property have increased but the base prices were already low in comparison to other top hotspots and thus attractive to buyers and investors.
Pending EU elections, Brexit and overall uncertainty in the markets has taken a toll on the prime home market place with 50% of the global declines being located in Europe. But the continent did have its location standouts, including Amsterdam, Barcelona, Berlin, Gstaad, and Munich. For the second home market top performers for 2016 include Ibiza, Lake Como, Mallorca and Western Algarve.
Regional Growth Averages
Where are the top regions for growth? The PIRI top 100 shows that the largest percentage of growth is in Australasia at +11.4%, Asia with +5.1% and North America at +4.5%. The least performing included Africa at -3.4%, the Middle East at -3.3% and Russia/CIS showing a negative growth rate of -5.5% due to economic headwinds and weak currencies.
What about other types of properties?
‘Based on results from 2016, the value of a city-based luxury home increased by 2.4% on average, a ski home by comparison saw 1.9% growth, and a beach or coastal property slipped marginally by 0.5%.’
The report concludes that other prime property locations could see increased interest from buyers and investors, ‘Cities that offer the potential for attractive margins, where prices are rising from a low base and where any risk is tempered by a level of transparency and good governance (Paris, Berlin, Madrid, Dublin, Chicago and Seattle) look likely to perform well.’
By Kevin Murphy: www.kevinmurphy.london