Key European cities are predicted to buck global property price trends next year while prime property prices in other cities buckle under pressure. Knight Frank’s Prime Global Forecast 2019 is also predicting a convergence of price growth across the world’s luxury residential markets.
The proliferation of property market regulations, the rising cost of finance, uncertainty surrounding Brexit and, in some markets, a high volume of new prime supply, are weighing on prime prices, the report notes.
Of the 15 cities monitored, Kate Everett-Allen, partner at International Residential Research at Knight Frank, says Madrid, Berlin and Paris lead the forecast for 2019 with growth of 6%.
However, while still positive, this is “marginally down” on 2018 figures. “The normalisation of monetary policy, weaker economic growth and a fragile political landscape post-Brexit will influence demand, but the relative value of these cities remains a key driver.”
The report states that markets which have been the recipients of new macro-prudential measures in 2018, such as Hong Kong and Singapore, will slip down the rankings as buyers and developers adjust to the new taxes.
“Vancouver, which also falls into this bracket, is the exception to the rule. Our weakest prime market in 2018, largely as a result of increases in its foreign buyer tax and stamp duty in early 2018, Vancouver is expected to see prime prices stabilise in 2019 as local buyers start to identify buying opportunities.”
Taking account of the latest economic indicators, supply, demand and sales trends, Knight Frank predicts price performance in the 15 global cities to be:
◆ Madrid, Berlin and Paris 6%.
◆ Miami 5%.
◆ Vancouver 3%.
◆ Los Angeles and Sydney 2%.
◆ Geneva, Melbourne and London 1%.
◆ New York and Singapore 0%.
◆ Dubai -2.4%.
◆ Mumbai -5%.
◆ Hong Kong -10%.
In terms of the past 10 years’ top performers, the report lists the following cities:
◆ Vancouver 101.5%.
◆ Sydney 60%.
◆ New York 15.2%.
Key events in 2019 are likely to impact prime residential markets, Everett- Allen says, including:
◆ The UK’s expected split from the EU on March 29.
◆ The government in Mumbai’s implementation of a developer tax on unsold inventory.
◆ The possible relaxation of Hong Kong’s loan-to-value ratios. In addition, the full implications of state and local tax deductions in the US will be understood in April 2019 as tax returns are filed, the report notes.
Technological advancement is going to be one of the main trends next year, with universities, start-up industries and technology parks believed to be key drivers of future growth. It may also be the year in which US buyers increase their share of overseas purchases.
RISING COST: KLCC Tower in Malaysia, where property stamp duty increased. Picture: Izuddin Helmi Adnan
“In established western markets, non-traditional real estate sectors, such as student accommodation, retirement living and build-to-rent, will outperform the wider market,” Everett-Allen says. More cities will also enter the ultra-prime market.
“San Francisco, Chicago, Dallas, Beijing and Shanghai are expected to join the select club of cities where three or more sales above $25million take place annually.
Foreign buyers hit hard this year
Key property regulations implemented in 2018
◆Vancouver: 20% tax on foreign buyers and higher stamp duty.
◆Singapore: Additional Buyer Stamp Duty increased for foreign buyers and developers
◆Hong Kong: Vacancy tax for developers with apartments unsold for six months+ (proposed).
◆New Zealand: Ban on overseas buyers purchasing existing homes (can still purchase new-build properties).
◆Malaysia: Stamp duty increased. Source: Knight Frank Prime Global Forecast 2019