Global Trends: Prices Will Rise in 2019 at Slower Pace
Here are the factors affecting property prices, according to the 2019 Knight Frank Prime Global Forecast.
Slowing price growth is the story for 2019. Five of the 15 global cities tracked in the Knight Frank Prime Global Forecast—New York, Singapore, Dubai, Mumbai, and Hong Kong—all show zero or negative price growth. Berlin, Madrid, and Paris top the list with price growth of 6 percent, followed by Miami at 5 percent, Vancouver at 3 percent, Los Angeles and Sidney at 2 percent, and Geneva, Melbourne and London at 1 percent.
Berlin, Madrid, and Paris are predicted to resist the downward trend of prime residential property prices in 2019. According to the Knight Frank Prime Global Cities index, which tracks property prices across 43 cities worldwide, prices are rising at the slowest rate since 2012.
An interesting statistic is that prime residential prices, over the last ten years, have risen by over 100 percent in Berlin and Vancouver, and more than 50 percent in Sydney, Melbourne, and Miami. One major anomaly is that, while prices have risen 33 percent in London over the last ten years, the previous five years have shown a reduction in prices of 2 percent.
FACTORS AFFECTING PRICES
The significant factors affecting the fluctuation in property prices, according to the report, are changes to property market regulations, the rising cost of property financing, uncertainty in the UK and Europe due to Brexit, and the increased supply of prime property in some markets.
Vancouver, Singapore and Hong Kong have all introduced new property taxes in 2018, which have affected prices as buyers and developers adjust. Vancouver added a 20 percent tax on foreign buyers and a higher stamp duty. Singapore added a buyer stamp duty for foreign buyers and developers, and Hong Kong added a vacancy tax for developers with apartments unsold for six months.
New Zealand introduced a total ban on foreign buyers purchasing existing homes, although they still qualify to buy new properties. Events that will impact property prices in 2019 will be led by the UK leaving the EU, which is still a significant uncertainty and affects many countries. There may be a possible relaxation of loan-to-value ratios in Hong Kong which will impact borrowing. Technology will be seen as an essential driver to price growth with universities, technology parks and startup industries playing an active role in increasing demand for residential properties in certain areas.
Although U.S. buyers are benefiting from the strong dollar, there hasn’t been a steady flow of U.S. buyers offshore in 2018. 2019 may be the year that U.S. buyers increase their share of overseas purchases.
The report also predicts that in addition to the six major urban markets that saw residential properties sell over $25 million in 2018, San Francisco, Chicago, Dallas, Beijing, and Shanghai could join this elite group of cities with ultra-prime property sales.
Property remains a highly rated asset class, and for investors in prime residential property, 2019 may be a year of opportunity.