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Global Real Estate Trends from Knight Frank

Looking at the inaugural Knight Frank European Cities Review we see that Madrid and Dublin are the stand out recovery markets of 2013 and that foreign buyers originating form a diverse set of countries account for the largest component of demand in Monaco, Barcelona and Venice. Munich is projected to see the largest increase of wealthy individuals over the next decade. A lack of new supply, a widening pool of buyers and the movement of wealth away from geopolitical tension will determine the future performance of Europe’s luxury residential markets. It is likely that Rome, Barcelona and possibly Paris will join Dublin and Madrid as growth markets in 2014.

The profile of luxury buyers is expected to change. Private wealth individuals will still comprise a significant component of demand in Europe’s cities but family offices, sovereign wealthy funds and private investors will increasingly compete for the best properties. Growing interest from institutional investors- pension funds hedge funds and insurance companies – is already evident in Barcelona, Madrid and Dublin.

Although wealth creation is forecast to be strongest in emerging markets in Asia and Latin America, the appeal of Europe’s luxury bricks and mortar will –due to its history, diverse cultures, architecture and climate- remain the location of choice for the world’s wealthy.

The key to attracting the world’s rich will be accessibility and infrastructure. New flight routes or the introduction of a winter timetable from key buyer destinations can be sufficient to have a significant impact on demand levels. And this brings us to a regional snapshot:

Australia: The reserve bank decided to leave the cash rate unchanged at 2.5% likely to keep price growth in positive territory. The government has ordered a review of the regulations surrounding foreign buyers into Australia with concerns surrounding the significant amount of Asian buyers active in the new build sector.

China is seeing house prices turn and developers are turning to “zero down payment” promotions especially in 2nd & 3rd tier Chinese cities.

Hong Kong is seeing suppressed prices as a result of various cooling measures. The mainstream market saw prices decline by 0.4% in Q1 of 2014.

India experienced a wave of optimism after the victory of the winning National Democratic Alliance in the latest election. In 2013 house prices increased by 3.4%

In Indonesia the upcoming elections is creating a wait-and-see environment to the housing market. The Jakarta condominium market which has seen some of the highest price rises across the region in the last 2 years has slowed down in 2014.

In Japan the recent increase in consumption tax from 5%-8% is still being digested as developers are already facing rising costs.

In Malaysia the market is anticipating the introduction of GST for the first time in 2015. The Real Capital Gains Tax for both domestic & foreign buyers and tighter lending conditions has contributed to a subdued housing market performance.

New Zealand has seen a 9.2% increase nationwide in housing prices with Auckland and Christchurch leading the surge.

In Singapore the Total-Debt-Servicing-Ratio introduced in June 2013 has caused high-end condominiums and apartments to take up to a 13% price drop.

Surprisingly in Thailand the political unrest has not, as yet, affected the prices of Bangkok condominiums but a number of international developer launches have been put on hold until the political situation stabilizes.

Dubai’s prime residential property market is expensive by international standards. One million USD dollars buy approximately 146 sq meters of luxury living which is six times more than in London, seven times more than Hong Kong and ten times more than Monaco. Notably Moscow, Mumbai and Istanbul are also more expensive than Dubai.

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