Chinese cities top global rankings in house price growth

CHINESE cities account for nine of the top 10 rankings in Knight Frank’s latest Global Residential Cities Index Q4 which assessed house prices across 150 cities worldwide.

Nanjing leads the rankings with average prices ending last year 41.1% higher. Chinese cities would have occupied the entire top 10 had New Zealand’s Wellington not nudged Shenzhen out of the 10th spot.

However, Knight Frank expects the next quarter’s results to look significantly different.

The index covers the period to the end of 2016, but by last month a new round of lending curbs and purchase restrictions across China’s main cities had been seen, which have brought price growth in several cities to an abrupt halt.

Overall, the index increased by 6.6% last year, its highest rate in three years.

However, without the Chinese cities, the index would have increased by only 4.9%, says Knight Frank.

Beyond China, Auckland (12.4%) and Vancouver (17%) – for several years New Zealand and Canada’s stellar performers – have now been usurped by their respective rivals, Wellington (23.7%) and Toronto (19.8%).

New regulations are only part of the story. Vancouver has seen a new tax on foreign buyers, but investors are also keen to spread risk, with some equity-rich Aucklanders now looking for a foothold in the New Zealand capital too.

Oslo ( 21.7%) is Europe’s strongest- performing city, but Budapest (19%) is not far behind.

In Oslo, falling unemployment, record low interest rates and strong purchasing power have boosted demand.

The Dutch cities of Amsterdam, Utrecht and Rotterdam represent another centre of growth in Europe, all recording double-digit annual price rises. A lack of supply is the key determinant of accelerating prices.

Seattle ( 10.8%) leads the US cities with Denver (8.9%) next in line.

The impact of the Federal Reserve’s third rate rise in 10 years (to 1%) will filter into next quarter’s edition, but a slowdown is not envisaged in US cities’ price inflation. And “we may see stronger capital outflows from the US to key European and Asian cities”.

In the UK, six of the eight cities tracked by the index recorded positive price growth, but only one, Bristol (10.1%), saw prices reach double figures. Improving economic productivity and a structural undersupply of new housing is supporting price growth in several regional UK cities.

The foot of the rankings table remains largely unchanged with Moscow, Aberdeen, Seville, Darwin and Jaipur jostling for position within the bottom five.

No single world region dominates, although the Americas are notable by their absence.