Global Review - Growth of luxury house prices gathers pace in second quarter

Results for Q2 2013

• Prime property prices increased on average by 2.4% in the second quarter of 2013
• Prime prices across the 28 cities tracked by the index increased by 5.6% in the year to June 2013
• Although Europe, with an annual fall of 0.9%, remains the weakest performing region it is up from -3.4% a year earlier
• Jakarta recorded the strongest price growth for the third consecutive quarter up by 27.2%
• Madrid was the weakest performing prime residential market in the last 12 months, declining by 11.9% 

Knight Frank’s Prime Global House Price Index now stands 27% above its financial crisis low in the second quarter of 2009 and has recorded its strongest quarterly growth for three years.

The top-performing markets are still recording double-digit annual price growth, but the weakest markets are no longer falling at the rate they were earlier this year. The range between the top and bottom ranking city has shrunk from 56 percentage points last quarter to only 39 points.

Not only has the gap narrowed but the proportion of cities recording positive price growth has increased, from 52% a year ago to 71%.

Jakarta is at the top of the rankings for the third consecutive quarter, with luxury prices in the Indonesian capital now 27.2% higher than a year earlier. With the economy growing at a rate of 6% per annum it remains a focus for new wealth in the wider Asia Pacific region.

European capitals such Rome, Paris and Madrid continue to occupy the bottom rankings although the rate of price falls has slowed. Across Europe’s prime residential markets prices fell by 0.9% in the year to June, compared to a fall of 3.4% in the same period.

Luxury prices in Dubai increased by 21.6% in the year to June. The price of luxury villas began to rise in early 2012 and apartments are now following suit. The city is attracting demand from North African, Asian and Middle Eastern buyers, many are cash buyers which may mitigate the impact of the prospective mortgage cap which is currently under discussion.

Prime prices in Singapore look to have been only marginally impacted by the government’s seven rounds of cooling measures, rising 5.5% in the second quarter, but this was due primarily to high end sales in one key project: Twentyone Anguilla Park.

In Tokyo the index tracks the price performance of homes above ¥100m. This market segment has benefitted from the Bank of Japan’s aggressive monetary easing policies. Prices jumped 21% in the second quarter as domestic buyers profited from the Nikkei’s recent surge and foreign buyers from Singapore, Hong Kong and Taiwan took advantage of the weak yen.

Policymakers in Asia and Europe are polarised in their approaches. Asia’s governments are stepping up efforts to cool price growth by heightening the restrictions for foreign ownership as highlighted in Knight Frank’s Asia Pacific Residential Review.

In contrast, many European economies – particularly the more debt-stricken ones – such as Greece, Spain and Portugal are taking the opposite tack and introducing “Golden Visas” and tax incentives to attract non-EU investors to help stimulate their markets.

The Knight Frank Prime Global Cities Index established in 2011 is the definitive means for investors and developers to monitor and compare the performance of prime sales markets across key global cities. Prime property corresponds to the top 5% of the mainstream housing market in each city. The index is compiled on a quarterly basis using data from Knight Frank’s network of global offices and research teams.

Courtesy: Knight Frank

For further information please contact:

Residential Research
Kate Everett-Allen
International Residential Research
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[email protected]

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Bronya Heaver
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