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Global prime residential price softening gathers pace over 12 months to Q3

Knight Frank says that despite a longer-than-expected period of loose monetary policy and steady wealth creation, luxury sales volumes are at their weakest for several years in many first-tier global cities.

Slower global economic growth – the IMF lowered its 2019 forecast from 3.3% to 3.0% in October – along with escalating headwinds: US/China trade relations, Hong Kong’s political tensions, a US presidential election in 2020 and the Brexit conundrum are influencing buyer sentiment.

Moscow leads the index this quarter with prime prices rising by 11% over the 12 months to September 2019 due in part to strengthening demand and the completion of a number of high-end projects in prime areas such as Ostozhenka and Tverskoy.

Secondary cities in Asia are creeping back into the top ten including Taipei (8.9%), Manila (7.4%), Guangzhou (6.2%) and Delhi (4.4%), according to Knight Frank data.

A mix of economic growth (Manila), infrastructure improvements (Guangzhou), redirected capital due to tensions (Taipei) and a price correction (Delhi) explain their performance.

As Knight Frank forecast last year, the eurozone’s key cities of Berlin (6.5%), Madrid (4.2%) and Paris (4.2%) have performed strongly to date in 2019 but they have been joined, and in some cases outperformed, by Frankfurt (10.3%) and the Swiss cities of Geneva (5.6%) and Zurich (4.5%). London had slipped to 41st out of 45 in respect of severity of price softening over the 12-month period, with pricing falling by 3.9%.

Kate Everett-Allen, Head of International Residential Research at Knight Frank, explains:

“Stockholm’s recovery is this quarter’s surprise result. Following a sharp decline in 2018 annual prime price growth is back in positive territory (2.6%). Seoul was the weakest-performing city in the year to September due in part to a price cap on new homes which is expected to come into effect in Q4 2019, this follows other regulations such as tighter mortgage regulations and higher taxes for multiple homeowners.”

The Knight Frank Prime Global Cities Index is a valuation-based index which tracks the movement in prime residential prices in local currency.

james.wallace@realassetmedia.com