Prime property prices in Kuala Lumpur dropped by 0.9 percent during the 12-month period ending December 2015, but the prices in the city remained static in the fourth quarter, perhaps indicating the top tier of the prime residential market has reached its peak in terms of prices.
Although five cities recorded double-digit annual price growth in 2015 according to real estate firm Knight Frank in its latest look at the sector, it said the overall narrative is one of converging market performance.
Kate Everett-Allen from Knight Frank examined the latest data.
Vancouver leads the rankings for the third consecutive quarter. Luxury residential prices increased by 24.5 percent during 2015. Tight supply, strong demand – boosted by a weaker Canadian dollar – and the absence to date of any market intervention explained the acceleration in prices.
Sydney shared similar market fundamentals as Vancouver, with prices up 14.8 percent year-on-year. However, with the economy slowing and the introduction of fees for foreign buyers the rate of price growth is expected to cool in 2016.
Asia’s strong performers have switched places. Three years ago Jakarta, Guangzhou and Hong Kong dominated the top price rankings but Shanghai, Bangkok (pictured) and Seoul now lead their Asian neighbours.
Despite some strong performances, the overall picture is one of converging market performance. Two years ago the gap between the strongest and weakest-performing market stood at 43 percentage points; now this figure is closer to 29 percentage points.
The world’s top cities – the definitive safe havens following the global financial crisis – are seeing prime price growth cool. Prime central London’s marginal increase of 1 percent during 2015 underlines the extent to which buyers have been absorbing the stamp duty tax changes announced in 2014.
In New York, although the strength of the U.S. dollar, coupled with an increase in luxury supply, has limited price growth to some extent Knight Frank does not expect the new federal regulations for cash buyers to have a significant impact.
The key risks on the horizon for luxury residential markets, as highlighted in Knight Frank’s Prime Cities Forecast report, include further rate rises by the Federal Reserve and heightened geopolitical tension.
Add to this the recent stock market volatility, jitters over the economic news emanating from China, the slump in oil prices and the fragility of emerging markets and the risks look to be mounting.
It is unclear at this stage, given the removal of stimulus in some markets (as well as policy changes, new taxes and fees in others) whether a global economic slowdown would once again prompt strong capital flows into luxury property in the same way it did post-2008.
