Prime property prices in key cities around the word are continuing to moderate with the latest data showing they increased by 1.3% year on year, down from growth of 4.3% 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.
The highest growth was a price rise of 14.1% year on year on Berlin, followed by a rise of 12% in Moscow, a rise of 9.6% in Frankfurt, a rise of 8.4% in Tokyo and a rise of 7.6% in Edinburgh.
At the other end of the index, prices fell by 14.5% in Vancouver, by 9.9% in Istanbul, byn7.5% in Auckland, by 6.5% in Nairobi, by 5.8% in Seoul, and by 5.1% 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 (SALT) 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% of the world’s economies would see a slowdown in growth in 2019,’ the report says.
‘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,’ it points out.
‘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%), Frankfurt (10%), Edinburgh (8%) and Paris (8%) are out in front. All four cities share three key attributes; strong tenant demand, limited new supply and relative affordability,’ it explains.
It adds that in Canada, the gap between Toronto with a rise of 3% and Vancouver seeing prices fall by 14.5% continues to widen with almost 18% 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 says.
New York with prices down 5% and London with a fall of 5.1% 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 says. 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.