The value of luxury property in 33 of the world’s top cities grew just 4% in the year to September, 2104, and 0.2% in the third quarter, its weakest result in two years, with the US outperforming Europe, says Knight Frank
Luxury real estate prices in the world’s leading cities grew just 4% annually in Quarter 3, 2014, down from 6.6% a year earlier, according to new data.
The Prime Global Cities Index, from leading agent Knight Frank, which tracks luxury residential prices across 33 cities, rose just 0.2% in Quarter 3, 2014, its weakest performance in two years.
Jakarta, Indonesia, still tops the rankings, with prices rising 27% in the year to June, according to the latest data, but that is unlikely to last as in the first six months of 2014, values increased just 2.5%.
Los Angeles was second with a 16.3% annual rise and Tel Aviv, Israel, third on 14.0%, but both are calculated using Quarter 2 figures.
In fact, only Dublin, Ireland, which is 12.7% up year-on-year and 1.4% up from July-September, provided up-to-date data among the top five annual performers.
Looking at the most recently results, different cities are emerging, says Kate Everett-Allen, Partner in Residential Research for Knight Frank.
“Although Jakarta tops the rankings, with prices rising 27% in the year to June (for the latest data), the city has seen a sharp deceleration in prices with prices rising by only 2.5% in the first half of the year.
“In Dubai, the rate of luxury price growth has declined. This is in part due to temporary factors such as Ramadan which led to weaker buyer activity but also due to the UAE Central Bank’s mortgage cap which is stricter for those purchasing properties above AED5million.
“Analysing the data on a quarterly basis, Tokyo and Cape Town were the strongest performers with prices ending the three month period 9.2% and 6.3% higher respectively,” says Ms Everett-Allen.
The moderate price growth is partly attributable to much of the world having summer holidays, which usually slows sales and price increases.
However, prime city luxury property prices continue to outperform the mainstream sector. The average price of a luxury home is 36% higher than at the index’s lowest point in the second quarter of 2009, whilst the average price of a mainstream property has risen 14% over the same period.
The prospect of negative European economic news, tightening monetary policy in the US, the Scottish referendum and approaching General Election and ‘mansion tax’ debate in the UK and the persistence of cooling measures in key Asian cities have also had an effect.
Despite US financial concerns, three cities – Los Angeles, San Francisco, and Miami – were in the top 10 annual rankings and New York was just outside at 11th, whereas only Dublin and London, in 10th, made it.
On average, luxury prices rose by 10.5% on average across North American cities annually compared with only 1% in European cities.
For the first time, Seoul in South Korea joins the index. Since reaching a low in 2013, luxury residential prices are continuing to recover, rising by 4.1% in the year to September.
By Adrian Bishop, Editor, OPP Connect