Price growth in prime global city markets falls

Prime property prices in key cities around the word are continuing to moderate with the latest data showing they increased by 1.3 per cent year on year, down from growth of 4.3 percent two years ago.

The index from international real estate firm Knight Frank, covering the first quarter of 2019, reveals that the growth in the 12 months period was the lowest annual rate since the fourth quarter of 2009. reports that the highest growth was a price rise of 14.1 per cent year on year on Berlin, followed by a rise of 12 per cent in Moscow, a rise of 9.6 per cent in Frankfurt, a rise of 8.4 per cent in Tokyo and a rise of 7.6 per cent in Edinburgh.

At the other end of the index, prices fell by 14.5 per cent in Vancouver, by 9.9 per cent in Istanbul, byn7.5 per cent in Auckland, by 6.5 per cent in Nairobi, by 5.8 per cent in Seoul, and by 5.1 per cent in London.

The index report says that price growth in the top end sector in these 45 key cities is slowing due to political and economic headwinds, the rising cost of finance, and more property market regulations.

However, European cities account for seven of the top 10 rankings for annual growth and Moscow has risen up the rankings with the launch of a number of high-end projects in districts such as Ostozhenka pushing prices higher.

Miami leads the four cities in the United States tracked by the index, and the report explained that its appeal has been boosted by the State and Local Tax deduction ruling which has sparked a rise in the number of US tax migrants heading to Florida given the absence of income tax and inheritance tax as well as favourable corporate tax rates.

“Although still rising, the rate of wealth creation globally slowed in 2018. The last six months saw political and economic headwinds intensify. In the first quarter of 2019, the threat of a global trade war loomed, uncertainty surrounding Brexit peaked and the IMF projected that 70 per cent of the world’s economies would see a slowdown in growth in 2019,” the report said.

It stated, “Add to this, the rising cost of finance, the US alone has seen nine rate rises since December 2015 influencing not just the US but also the 13 plus currencies pegged to the US dollar, and a moderation in prime sales and hence prices was expected.

“However, there are exceptions to the rule. As we predicted in our Prime Forecast 2019, key European cities continue to outperform with seven of the top 10 rankings this quarter occupied by European markets. Berlin (14 per cent), Frankfurt (10 per cent), Edinburgh (eight per cent) and Paris (eight per cent) are out in front. All four cities share three key attributes; strong tenant demand, limited new supply and relative affordability.”

It added that in Canada, the gap between Toronto with a rise of three per cent and Vancouver seeing prices fall by 14.5 per cent continues to widen with almost 18 per cent percentage points now separating the two cities.

“Whilst both operate a foreign buyer tax, Vancouver has seen a flurry of additional measures aimed at reducing speculation and curbing price inflation,” it said.

New York with prices down five per cent and London with a fall of 5.1 per cent are almost level pegging although London is arguably further ahead in its market cycle as new buyer registrations are starting to build, the report also stated.

It added that from 01 July, New York will see the introduction of a new Mansion Tax, applicable to both residents and non-residents, the tax will be a graduated levy based on the purchase price.
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