Prime residential property prices around the world rose by 2.4% in the second quarter of 2013, according to the latest edition of the Prime Global Cities Index from Knight Frank. The index, which tracks the price performance of luxury homes across 28 cities, now stands 27% above its financial crisis low in the second quarter of 2009.
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%, the report also shows.
Jakarta is at the top of the rankings for the third consecutive quarter having recorded annual growth of 27.2%. With the economy in Indonesia growing at a rate of 6% per annum, the city is becoming a focus for new wealth in the wider Asia Pacific region, the report says. Dubai was also a high performer with luxury prices 21.6% higher than a year earlier. The price of prime villas began to rise in early 2012 and apartments are now following suit. The emirate 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.
Quote from PropertyForum.com : “At the turn of the century it was Dubai which became the focal point for international investment pushing the economy and the property sector to record highs. Initially, in the aftermath of the US mortgage crisis, the Dubai economy continued to push ahead and investment in property showed no signs of slacking.”
Although Europe, with an annual fall of 0.9%, remains the weakest performing region it is up from -3.4% a year earlier. European capitals such as Rome, Paris and Madrid continue to occupy the bottom rankings, although the rate of price falls has slowed considerably. However, Madrid was the weakest performing prime residential market in the last 12 months, declining by 11.9%
Monaco and London find themselves in the middle of the table, recording annual price growth of 8.2% and 6.9% respectively.
Prime prices in Singapore look to have flouted the government’s seven rounds of cooling measures by rising 5.5% in the second quarter, but this was primarily due to high end sales in one key project: Twentyone Anguilla Park. In Tokyo the index tracks the price performance of homes above ¥100 million. 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.
The report points out that 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 while many European economies, particularly the more debt stricken ones such as Greece, Spain and Portugal are taking the opposite tack and introducing visas and tax incentives to attract non European Union investors to help stimulate their markets.