Global highs and lows

Financial Mail - Investors Monthly - - Opening Bell -

UK prop­erty group Knight Frank pro­vides in­ter­est­ing in­sights into the home-buy­ing pat­terns of the world’s su­per rich in its lat­est Prime Global Cities In­dex.

The in­dex, which tracks lux­ury house price growth in 35 cities, sug­gests that global hous­ing mar­kets have sta­bilised fol­low­ing a pro­longed pe­riod of post-cri­sis volatil­ity.

Knight Frank recorded steady house price growth of 3%-4% (year on year) for the eighth con­sec­u­tive quar­ter in the first three months of 2016.

That fol­lows big swings in up­per-end house prices be­tween 2009 and 2013, with an­nu­alised price growth vary­ing from 9% in the first quar­ter of 2009 to 1% in the third quar­ter of 2012. Knight Frank’s head of res­i­den­tial re­search, Kate Everett-Allen, says the last time any city recorded a dou­ble-digit an­nual price de­cline was in the sec­ond quar­ter of 2015.

How­ever, Everett-Allen notes that there is still a sub­stan­tial gap in the per­for­mance be­tween dif­fer­ent cities and re­gions. In fact, the dif­fer­ence in price growth be­tween Van­cou­ver in Canada (26.3%) and Taipei, in Tai­wan (-7.6%) — re­spec­tively the world’s best and worst per­form­ing hous­ing mar­kets in the first quar­ter — was 34% (read the ta­ble).

Van­cou­ver’s out­per­for­mance is a re­sult of a se­vere lack of sup­ply, cre­at­ing up­ward pres­sure on prices, says Everett-Allen. Other hous­ing mar­kets be­sides Van­cou­ver that recorded dou­ble-digit growth in the first quar­ter are Shang­hai (20.3%), Syd­ney (12.3%) and Mel­bourne (12.1%), which placed Aus­trala­sia as the hottest world re­gion in the year to March 2016, with prices ris­ing 12% on av­er­age. In­ter­est­ingly, Cape Town ranked as Knight Frank’s fifth-best-per­form­ing hous­ing mar­ket, with growth of 6.9%.

Hong Kong, Moscow, Paris, Mi­lan, Tokyo, Kuala Lumpur and Delhi joined Taipei at the bot­tom of the rank­ings, with house prices in th­ese cities all tak­ing a dip in the first quar­ter. Prices in prime cen­tral Lon­don in­creased by only 0.8% in the year to March, its low­est fig­ure since Oc­to­ber 2009, when a 3.2% de­cline was recorded fol­low­ing the col­lapse of Lehman Broth­ers. Everett-Allen as­cribes Lon­don’s more muted per­for­mance to a se­ries of tax changes and a pre­ced­ing pe­riod of ex­cep­tional growth.

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