London’s prime housing market price decline bottoming out

London annual prices slipped -2.7%, but this appears to be bottoming out as falls have slowed to just -0.7% in the second half of the year, assuming an orderly Brexit. Berlin was the biggest riser in the index, with annual price growth of 9.0%.  Paris (+4.5%) and Madrid (+4.3%) also continued to see growth.

Disruptive forces are at work in prime residential markets around the world, creating local and regional divergence against a backdrop of slowing global economies. From growing wealth generation and the evolving needs and preferences of prime buyers, to market cooling measures and political uncertainty, a variety of factors are impacting values, in different ways in different locations.

Overall price growth across the world’s leading prime city housing markets slowed significantly in the second half of 2018, according to latest data from the Savills world cities prime residential index, which recorded its smallest annual increase since the global financial crisis.

The Savills World Cities Prime Residential Index reflects the price movements of prime residential real estate in key world cities. It tracks capital and rental values and gross yields of houses and apartments. Overall, the Index reflects a slowing of prime residential price growth globally, as many markets enter a new stage of the cycle. Combined growth across all cities was 2.3% in 2018, and just 0.3% in the second half of the year – the lowest since mid-2009. Seven cities experienced falls in price growth in the last six months of 2018.

Two Asian cities sit at the top of the Index. Hong Kong has the most expensive prime residential city property in the world. With an average value of $4,670 per sq ft, it is 56% more expensive than its next rival, Tokyo.

Sophie Chick, director, Savills world research explains:  

“Without doubt, the world’s wealthy will continue to want to hold one or more world city prime residential properties as part of their investment portfolio, both as a store of wealth and as a base for work and leisure. But as cities reach maturity on the world stage there will be less potential for rocket-fuelled price growth and we expect prime residential markets to settle a steadier growth trend over the foreseeable future. 

“There will be exceptions as new global cities emerge or economic conditions improve. In the short term, it’s the European cities that are likely to see the highest rates of price growth, benefitting from Brexit, lower prices and renewed confidence in markets like Spain.”

james.wallace@realassetmedia.com