VANCOUVER SEES STRONGEST RISE IN LUXURY RESIDENTIAL PRICES
Although five cities recorded double-digit annual price growth in 2015 the overall narrative is one of converging market performance. — Kate Everett-Allen examines the latest data.
Vancouver leads the rankings for the third consecutive quarter. Luxury residential prices increased by 24.5% in 2015. Tight supply, strong demand – boosted by a weaker Canadian dollar – and the absence to date of any market intervention explains the acceleration in prices.
Australasia was the strongest performing world region in 2015
Sydney shares similar market fundamentals as Vancouver with prices up 14.8% year-on-year. However, with the economy slowing and the introduction of fees for foreign buyers the rate of price growth is expected to cool in 2016.
Taipei has taken the title of weakest performing market from Singapore
Asia’s strong performers have switched places. Three years ago Jakarta, Guangzhou and Hong Kong dominated the top of the price rankings but Shanghai, Bangkok and Seoul have now usurped their Asian neighbours.
Despite some strong performances, the overall picture is one of converging market performance. Two years ago the gap between the strongest and weakest-performing market stood at 43 percentage points, now this figure is closer to 29 percentage points.
The world’s top cities – the definitive safe havens following the global financial crisis – are seeing prime price growth cool.
Prime central London’s marginal increase of 1% in 2015 underlines the extent to which buyers have been absorbing the stamp duty changes announced in 2014.
In New York, although the strength of the US dollar, coupled with an increase in luxury supply, has limited price growth to some extent we do not expect the new federal regulations for cash buyers to have a significant impact.
The key risks on the horizon for luxury residential markets, as highlighted in our Prime Cities Forecast report, include further rate rises by the Federal Reserve and heightened geopolitical tension. Add to this the recent stock market volatility, jitters over the economic news emanating from China, the slump in oil prices and the fragility of emerging markets and the risks look to be mounting.
It is unclear at this stage, given the removal of stimulus in some markets (as well as policy changes, new taxes and fees in others) whether a global economic slowdown would once again prompt strong capital flows into luxury property in the same way it did post-2008.
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