The latest report from global real estate consultant Knight Frank has named the top global prime residential markets to watch in 2020.
Prime residential price growth stumbled in 2019 across many cities. The Knight Frank Prime Global Cities Index, which tracks the movement in prime prices across 45 cities worldwide, is mirroring global economic growth. The average annual rate of growth in the year to Q3 2019 was 1.1 per cent, meaning prime prices are rising at their slowest rate in a decade.
The slow rate of growth in prime residential property makes it all the more important to identify which cities will offer the most potential to British overseas property investors over the new year.
Paris leads Knight Frank’s prime residential forecast for 2020 with price growth of 7 per cent; economic stability, low interest rates, constrained prime supply and strong tenant, as well as second home demand, will underpin price growth. Home to Europe’s largest infrastructure initiative, the Grand Paris Project, as well as the 2024 Summer Olympics, both events will provide further stimulus.
In second place, sit Berlin and Miami. Knight Frank expects both markets to see prime residential price growth of 5 per cent in 2020 but for different reasons. Sound fundamentals – strong demand (domestic and international) and significant regeneration – will keep Berlin high in the rankings despite the proposed rent cap. In Miami, the city will benefit from the continued momentum from the State and Land Tax (SALT) tax deduction.
At 4 per cent, Geneva and Sydney are both seeing prime residential price growth recover having dipped in recent years. Confidence in both residential markets has returned due to lower interest rates and a limited supply pipeline.
The next group of cities can be defined as steady yet sustainable.
Madrid, Singapore and Melbourne, are expected to register price growth of 3 per cent in 2020 with international inquiries (Madrid), redirected capital outflows (Singapore) and a lower interest rate environment (Melbourne) shoring up demand.
In Los Angeles the lower end of the prime residential market, below US$2 million, is active with strong demand for quality properties, the mid-segment US$2- US$10 million is registering moderate price appreciation, but above US$10 million the market is slow, patchy at best
Hong Kong’s luxury segment to see largely static prime prices (0 per cent) in 2020. Research shows the Hang Seng Index leads the mass residential market by three to six months, but luxury prices are largely resilient with a weak correlation to both GDP and equities. A number of high-end transactions in The Peak in 2019 would support this argument.
For Mumbai (-1 per cent) the economic environment deteriorated in 2019 influencing market liquidity, this was further exacerbated by an additional 1 per cent stamp duty taking the total to 6 per cent. Knight Frank believes prime residential buyers to remain cautious in 2020.
For Dubai (-2 per cent), 2020 marks a landmark year when it will host Expo 2020. Forecast to attract 25 million visitors, the city has seen significant investment in new infrastructure in the lead up to the event, such as the expansion of the Metro Line. These changes, along with the introduction of long-term visas of up to 10 years, will boost prime demand.
In New York (-3 per cent), Knight Frank expects lower mortgage rates and strong employment indicators to start to cancel out the high completion rates seen in recent years.
Despite sitting at the bottom of Knight Frank’s rankings for 2020, Vancouver’s -5 per cent decline in prime prices reflects an improving scenario. Prime prices have been falling at a rate of 15 per cent per annum but shrinking inventories, along with a gradual adjustment to the property market regulations, are seeing a slow recovery in buyer sentiment.