Property Price Growth Is the Slowest in the Global Cities Index Since 2015.
Despite the global economy’s strong results, increased caution on the part of policymakers keen to use macro prudential steps to curb price inflation, as well as escalating affordability constraints, are keeping a lid on urban property price growth worldwide, according to a new study by international real estate consultancy Knight Frank. propertyfinder
A year ago, Knight Frank saw 12 cities develop at a rate of more than 20% per year; this year, only one city, Surat, India, did so.
The capital, which is located on India’s west coast, has seen a price increase due to an abnormally low base in Q1 2017, which was triggered by the country’s unprecedented demonetization of high-value currency.
The European Union’s upward trend continues. Europe has eleven of the top twenty cities in terms of annual growth. Rotterdam (14.8 percent), Edinburgh (12 percent), Porto (11.7 percent), and Sofia (11.3 percent) have now joined long-time leaders Berlin (14.9 percent), Budapest (14.4 percent), and Reykjavik (14.4 percent) (11.8 percent ).
According to the National Bank of Canada, which tracks average prices in each metropolitan area, Vancouver continues to outperform, with annual growth of 15.4 percent. This highlights the disparity with the prime market, where rates only rose by 0.2 percent over the same time span.
Seattle (12.9 percent) continues to lead the index’s 15 US cities, buoyed by a simple lack of demand in the face of that demand. In 2017, the city saw US$10.4 billion in real estate investment, second only to San Francisco as the US’s largest technology center.
Kate Everett-Allen of Knight Frank commented, “After three rate hikes in the year leading up to March 2018 (and a fourth since), average prices in the 15 cities included in our index rose by 6.8% over the year. The equivalent figure for the UK’s eight cities is 4.9 percent, with Edinburgh leading the way and Aberdeen lagging behind “” ormer
Southern Europe is being deeply divided. Though cities in Italy are well-represented at the bottom of the table, cities in Spain and Portugal are growing faster. Porto, Malaga, and Madrid are all at the top of the rankings, with annual growth rates of 11.7 percent, 10.4%, and 10.3%, respectively.
Divergent markets can be seen not only at a regional level, but also at a country level, according to Knight Frank. The ten countries with the greatest difference between their best and worst performing cities are synonymous with the world’s most powerful economies; all ten are members of the G20. Surat (22%) and Delhi (22%) are separated by 27 percentage points in India’s top ten (-5 percent ).
To avoid the new vacancy tax, Hong Kong luxury condos have entered the leasing market.
According to the new Hong Kong Residential Sales Market Monitor study from global property consultancy JLL, approximately 1,500 luxury units (Class E flats with a saleable area of 1,722 sq. ft. or more) will be completed in the next 30 months. Developers are likely to shift more unsold luxury flats from the sales market to the leasing market in order to mitigate the effect of the new vacancy levy.
The government declared a new vacancy tax at the end of June 2018, imposed at 200 percent of the rateable value of unleased or unsold units one year after the issuance of the Occupation Permit — twice the annual rent, which under current market conditions translates to around 5% of the property price. In addition, regardless of the sales process, developers would be expected to launch at least 20% of the units highlighted in the pre-sale consent application at each turn of sales.
Following the announcement of the new tax, Sun Hung Kai Properties revealed plans to lease out all 140 units in Tower 6 (approximately 20% of the total units) at “Victoria Harbour” in North Point as serviced apartments.
JLL’s Regional Director of Capital Markets, Henry Mok, commented, “We expect more developers, especially those in non-core luxury residential areas, to put unsold stock for lease to escape the tax, given the increased pressure to offload luxury stock in the short term and recent improvements in leasing demand. However, since luxury properties usually take longer to sell, this pattern is likely to be more noticeable at the top of the market.”
JLL’s National Director of Research, Cathie Chung, said, “Given that 56 percent of all new future luxury flats built over the next 30-months will be located in the New Territories, developers of unsold luxury flats in the New Territories are more likely to consider moving units to the leasing market. The opening of Shrewsbury Academy, Malvern Collage, and French International School in the New Territories earlier this year could help to improve the leasing business. Overall, we expect luxury rental prices to remain stable in 2018, though increased supply is likely to put downward pressure on rents.”
