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Luxury house prices in Chinese cities record strongest global growth in 2016

Property Markets / Outlook

China

Feb 28 2017

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Australia, 1 March 2017 – Prime residential property prices recorded stellar growth in Shanghai (27.4%), Beijing (26.7%) and Guangzhou (26.6%) in 2016 according to Knight Frank’s unique Prime International Residential Index (PIRI 100), which tracks the value of luxury homes in 100 locations worldwide.

Of the 100 markets analysed as part of Knight Frank’s Wealth Report 2017 – Chinese cities outpaced other markets by some margin. However, new cooling measures, including higher deposit rates and home purchase restrictions, have already been introduced and are having their desired effect of slowing the rate of growth.

Sydney and Melbourne currently sit at 11th and 12th respectively on the PIRI 100 list with 9.3% and 8.8% annual growth throughout 2016.

Knight Frank’s Director, Residential Research, Australia Michelle Ciesielski said, “In Sydney and Melbourne over the past 24 months, demand for prime property continues to outweigh the limited supply being brought to market in both the established and new supply markets.

“Locally, retirees and those approaching retirement are still taking advantage of this supply gap in the market, achieving elevated prices for their family homes and downsizing to a low-maintenance property.

“The expat dollar is still favourable, and many are securing their ideal home for when returning to Australia. Foreign interest in Australian prime residential property has remained relatively strong throughout 2016, with many currencies holding an ongoing purchasing power against the Australian dollar.

“More due diligence is being carried out – particularly due to the stronger penalties being enforced by the Australian government, for those who breach the rules, and the processing fee payable for every application to the Foreign Investment Review Board,” said Ms Ciesielski.

Kate Everett-Allen, partner, residential research at Knight Frank said, “Despite the rate of growth in these Chinese cities, the average value of the world’s leading prime residential markets recorded slower growth in 2016 than the previous year. Values rose by 1.4% on average in 2016, compared with 1.8% in 2015.”

Knight Frank’s unique Prime International Residential Index (PIRI) also reveals a huge gap of 49 percentage points between strongest and weakest-performing luxury market, up from 45 in 2015.

Closer analysis of the PIRI 100 highlights some significant regional variations:

Australasia

•Australasia was the strongest-performing world region in 2016 with prices rising by 11.4% year-on-year.  

•Auckland leads the way with prime prices ending the year 16.0% higher.  A lack of supply, rising demand and record low interest rates fuelled price growth.

•Despite the introduction at state-level of a higher rate of stamp duty for foreign buyers, Sydney and Melbourne recorded strong price growth of 9.3% and 8.8% respectively year-on-year.

Asia

•Outperformed only by China’s top cities, Seoul saw luxury prices increase by 16.6% in 2016. Low interest rates and strong economic growth boosted demand in the South Korean capital.

•Asia proved the world’s second- strongest performing world region with prices rising by 5.1% on average. 

•Hong Kong, which recorded negative growth in 2015, drifted upwards in 2016, recording annual growth of 2.1%.

North America

•Toronto marginally eclipsed Vancouver to take the title of North America’s strongest performer in 2016 with prices rising 15.1% year-on-year. 

•Prime prices in Vancouver ended the year 15% higher, notably lower than the 25% increase recorded in 2015. A new 15% tax on foreign buyers introduced in August saw sales volumes decrease. 

•In New York, the strength of the US dollar negated some overseas interest and the delivery of a number of luxury projects helped inflate supply but luxury prices proved resilient rising 3.5% year-on-year.

Europe 

•Amsterdam is Europe’s strongest-performing city with prices increasing 10.1% in 2016. 

•The Alpine resort of Gstaad is this year’s top-performing ski resort. Prices here rose 10.0% due to limited supply as the cap on second homes filtered through into the market.

•Prices in prime central London market slipped 6.3% in 2016 as changes to stamp duty in recent years weakened demand but the final quarter saw activity strengthen as buyers adjusted to the new tax burden.

Latin America

•Latin America is one of four world regions which recorded negative growth in 2016. Prices slipped by 2.7% year-on-year. 

•Buenos Aires leads the rankings for Latin America but with only a marginal increase in prices (0.02%). 

•Both Mexico City (-2.04%) and Sao Paulo (-2.40%) have seen prime price declines.

Middle East 

•The Middle East saw prime property prices decline by 3.3% on average in 2016, due in part to the fluctuation of oil prices.

•Tel Aviv is the Middle East’s strongest-performing city with prices rising by 3.01%. 

•Market fundamentals in Dubai, where luxury prices declined by 4% in 2016, is expected to see sentiment improve in 2017 as the emirate prepares to host the Expo 2020 and it benefits from  government spending on key infrastructure projects.

Looking ahead, Kate Everett-Allen says, “Cities that offer the potential for attractive margins, where prices are rising from a low base and where any risk is tempered by a level of transparency and good governance – Paris, Berlin, Madrid, Dublin, Chicago and Seattle look likely to perform well.”

 

About Knight Frank

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank has more than 14,000 people operating from 413 offices across 60 countries. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit Knight Frank.

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SOURCE: Press Release

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