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2 RESEARCH KNIGHT FRANK
-12
-9
-6
-3
0
3
6
9
12
15
40
60
80
100
120
140
160
180
201
8 Q1
201
7 Q3
201
7 Q1
201
6 Q3
201
6 Q1
201
5 Q3
201
5 Q1
201
4 Q3
201
4 Q1
201
3 Q3
201
3 Q1
201
2 Q3
201
2 Q1
201
1 Q3
201
1 Q1
201
0 Q3
201
0 Q1
200
9 Q3
200
9 Q1
200
8 Q3
200
8 Q1
200
7 Q3
200
7 Q1
200
6 Q3
200
6 Q1
12-month % change Prime Global Cities Index*
FIGURE 1
Prime price performance Indexed, 100 = Q1 2006 vs.12-month %
change
Knight Frank’s Prime Global Cities Index is still rising but its
rate of growth is slowing
Why? ( 1 ) ( 2 ) ( 3 ) ( 4 )
Property market
regulations
Rising cost of finance
Strong rates of supply (in
some markets)
Geopolitical landscape
(trade disputes, Brexit, Emerging Market volatility)
A NEW CHAPTER The economic landscape is changing as monetary
policy normalises and there are geopolitical jitters, but with risk
comes opportunity.
According to our Prime Global Cities Index, which tracks the
movement in prime prices across 43 cities worldwide, luxury
residential prices are now rising at their slowest rate since 2012.
The proliferation of property market regulations, the rising cost
of finance, uncertainty surrounding Brexit and in some markets, a
high volume of new supply, is weighing on prime prices.
More muted growth is the main story behind our 2019 forecast. In
2018, the gap in annual price growth between the strongest and
weakest-performing markets will end the year at 25 percentage
points, in 2019, we forecast this figure will shrink to 16 points
as the outliers start to converge.
Of the 15 cities that we forecast, the key European cities of
Madrid, Berlin and Paris, lead our forecast for 2019 with growth of
6%. Still positive, but marginally down on 2018, the normalisation
of monetary policy, weaker economic growth and a fragile political
landscape post-Brexit will influence demand, but the relative value
of these cities remain a key driver.
Markets that have been the recipients of new macro-prudential
measures in 2018, such as Hong Kong and Singapore, will slip down
the rankings as buyers and developers adjust to the new taxes.
Vancouver, which also falls into this bracket, is the exception to
the rule. Our weakest prime market in 2018, largely as a result of
hikes to its foreign buyer tax and stamp duty in early 2018,
Vancouver is expected to see prime prices stabilise in
2019 as local buyers start to identify buying opportunities.
Of the 15 cities, Sydney, London and New York sit mid-table with
forecasts of 0%-2% growth. A lack of new supply is supporting
Sydney’s prime market. In London, changes to stamp duty have
now been fully absorbed, suggesting activity could strengthen
once political uncertainty in relation to Brexit starts to recede.
In New York, economic growth and wealth creation are starting to
cancel out the high completion rates observed in the prime market
over the last few years.
Source: Knight Frank Research
-
3 RESEARCH KNIGHT FRANK
FIGURE 2Prime price performance over the last decade Ranked by
10-year % change
PROPERTY REGULATIONS IN 2018
Knight Frank’s analysts provide their prime price forecast for
2019, taking account of the latest economic indicators, supply,
demand and sales trends
6.0%MADRID
6.0%PARIS
1.0%GENEVA
6.0%BERLIN
-2.4%DUBAI -5.0%
MUMBAI
-10.0%HONG KONG
2.0%SYDNEY
1.0%MELBOURNE
0.0%SINGAPORE
1.0%LONDON
0.0%NEW YORK
2.0%LOS ANGELES
3.0%VANCOUVER
5.0%MIAMI
PRIME GLOBAL FORECAST 2019Vancouver: 20% tax on foreign buyers
and higher stamp duty
Singapore: Additional Buyer Stamp Duty increased for foreign
buyers and developers
Hong Kong: Vacancy tax for developers with apartments unsold for
6 months+ (proposed)
New Zealand: Ban on overseas buyers purchasing existing homes
(can still purchase new-build properties)
Malaysia: Stamp duty increased
Hong Kong11.4%
Hong Kong39.4%
London33.7%
London
Los Angeles33.4%
Los Angeles29.1%
Mumbai28.5%
Mumbai8.0%
Paris26.3%
Paris7.9%
Berlin47.6%
Berlin*118.3%
Vancouver52.7%
Vancouver101.5%
Miami49.9%
Miami30.0%
Sydney58.7%
Sydney60.0%
Melbourne46.2%
Melbourne58.8%
-2.2%Madrid39.5%
Madrid25.6%
New York15.2%
New York17.2%
Geneva
Geneva
-17.4%
16.9%
Singapore
-2.0%Singapore
19.8%24.8%
Dubai
Dubai*
1.3%
*Data corresponds to Q1 2009-Q3 2018
RATE RISES IN 2018
01 Jan 2018 30 Nov 2018
0 5 10 15 20 25
HONG KONG
TURKEY
CANADA
UK
US
0 5 10 15 20 25
HONGKONG
TURKEYCANADAUKUS
2.25
0.50 1.00 8.00
24.00
1.75
2.501.750.75
1.50
01 Jan 2018
30 Nov 2018
HONG KONG
TURKEY
CANADA
US
UK
01 Jan 2018
30 Nov 2018
Base Rate (%)
Five-year % change (Q3 2013- Q3 2018)
10-year % change (Q3 2008-Q3 2018)
Berlin
Dubai
Geneva
Hong Kong
London
Los Angeles
Madrid
Melbourne
Miami
Mumbai
New York
Paris
Singapore
Sydney
Vancouver
Rise slightly
Rise significantly
Remain the same
Fall slightly
PRIMESALES
PRIMEDEMAND
PRIMESUPPLY
FUTURE DIRECTIONHow will demand, supply and sales volumes change
in 2019?
RESIDENTIAL RESEARCHPRIME GLOBAL FORECAST 2019
UK: Foreign buyer SDLT consultation starts Jan 2019. UK leaves
EU on 29 March 2019.
Dubai: New five to 10-year investment visas and five-year
retirement visa for 55 yrs+.
Mumbai: Developer tax on unsold inventory.
Hong Kong: Stamp duties unlikely to change but loan-to-value
ratios could be relaxed.
US: The full implications of State and Local Tax (SALT)
deductions will be understood (Apr 2019 tax deadline).
EVENTS 2019
-
OPPORTUNITIES & DRIVERS
RESIDENTIAL RESEARCHPRIME GLOBAL FORECAST 2019
RISK MONITOR
5KNIGHT FRANK RESEARCH
TOP RISKS BY WORLD REGION
Europe1. Change in national
government
2. Brexit
Asia Pacific1. Change to property
market regulations
2. Local economic slowdown
North America1. Global trade
disputes
2. Oversupply of luxury homes
Middle East1. Commodity prices2. US Federal
Reserve rate hikes
CHANGES TO PROPERTY MARKET REGULATIONS
GLOBAL ECONOMIC SLOWDOWN
LOCAL ECONOMIC SLOWDOWN
GLOBAL TRADE DISPUTES
CURRENCY VOLATILITY
CHANGE IN GOVERNMENT
GEOPOLITICAL CRISES
COMMODITY PRICES
EMERGING MARKET VOLATILITY
OVERSUPPLY OF LUXURY HOMES
US FED RESERVE RATE RISE/S
BREXIT
How important will the following factors be to your city’s prime
residential market in 2019?
Our global research teams share their views as to which factor
or event, assuming it were to occur, would influence their luxury
market the most.
The score reflects the average for all 15 cities (high = most
important, low = least important).
Below we highlight what motivates prime buyers and what is
fuelling demand globally
Wealth creation hotspotsThe number of high net worth individuals
with US$5m+ in net assets is forecast to rise by 43% to 3.6 million
by 2022, according to Knight Frank’s Wealth Report. Asia is
forecast to see a 61% increase over the same period.
Value still to be foundFor some, where currency and price
performance combine, discounts exist. A Euro and USD buyer
purchasing in prime central London in Q3 2018 have seen a 29% and
25% discount compared with the market’s peak in August 2015.
Lifestyle remains a key motivator✔ Security ✔ Education ✔
Tax
Taking stockThe extent to which prime markets are influenced by
stocks, shares and commodities, in particular oil, varies globally.
There is a close correlation between the Hang Seng Index and Hong
Kong’s prime residential market, whilst oil prices are influential
in Dubai. Knowledge of local drivers is critical.
9
9
1010
9
9
8
8
8
8
75
Source: Knight Frank Research
5
6
3
42
Robust global economic forecastThe IMF forecasts 3.7% growth in
2019 and 2020.
1
The world is getting smaller and property remains highly rated
asset classIn 2017, 32% of all commercial and residential
transactions (by volume) involved cross-border purchases, up from
25% during 2009-2011 (Real Capital Analytics).
-
UK Housing Market Forecast - November 2018
RESEARCH
UK RESIDENTIAL MARKET FORECAST 2018
FOR RESEARCH ENQUIRIES:
Kate Everett-Allen Global Residential Research +44 20 7167 2497
[email protected]
Liam Bailey Global Head of Research +44 20 7861 5133
[email protected]
Knight Frank Research Reports are available at
KnightFrank.com/Research
Important Notice
© Knight Frank LLP 2018 – This report is published for general
information only and not to be relied upon in any way. Although
high standards have been used in the preparation of the
information, analysis, views and projections presented in this
report, no responsibility or liability whatsoever can be accepted
by Knight Frank LLP for any loss or damage resultant from any use
of, reliance on or reference to the contents of this document. As a
general report, this material does not necessarily represent the
view of Knight Frank LLP in relation to particular properties or
projects. Reproduction of this report in whole or in part is not
allowed without prior written approval of Knight Frank LLP to the
form and content within which it appears. Knight Frank LLP is a
limited liability partnership registered in England with registered
number OC305934. Our registered office is 55 Baker Street, London,
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TRENDS TO MONITOR Knowing what to track, and when to act can be
the difference between a low or high return on your investment.
Which buyers were responsible for the largest rise in enquiries
in your city in 2018? Selected cities
NEW BUYER TRENDS
Astrid Recaldin International PR Manager +44 20 7861 1182
[email protected]
MEDIA ENQUIRIES:
4 Detachment of ultra-primeThe US$25m+ market saw a total of 155
transactions in six leading urban markets in the 12-months to
August 2018, up 13% year-on-year. We expect more cities to enter
this select club with San Francisco, Chicago, Dallas, Beijing and
Shanghai all vying for contention.
5 Greater synchronicityThe property cycles of first-tier world
cities are more in sync as their financial markets have become more
integrated. Low interest rates, greater institutional investment
and rising wealth have left their mark on most prime markets but it
also means policy responses in one market may have broader
ramifications globally.
6 Multi-tiered marketsA city’s housing market is far from
homogenous. Whether driven by policy, supply or demand, we are
seeing stronger mainstream sectors in some cities (Hong Kong,
London) and stronger prime markets in others (Sydney). The
divergent performance of different market tiers will become more
evident as affordability constraints deepen.
Market fundamentals such as demand and supply indicators as well
as political stability, quality of life and accessibility are on
the basic checklist for most prime buyers. Below, we go one step
further to highlight some of the trends we think deserve closer
attention over the next year:
1 Follow the techThe knowledge economy – universities, start-up
industries and technology parks – will be key drivers of future
growth.
2 USD all powerful?Although USD-denominated buyers are enjoying
stronger purchasing power abroad, we’ve yet to see a strong flow of
outbound capital into prime residential markets. 2019 may be the
year USD buyers increase their market share, or it may be we see it
being invested closer to home.
3 Demographics dictateIn established western markets,
non-traditional real estate sectors will be under the spotlight –
student accommodation, retirement living and build-to-rent will
outperform the wider market.
PARISMiddle East, US, China
DUBAIEurope, US,
China
MADRIDFrance,
Germany, Middle East
SYDNEYExpats
(with USD)
SINGAPOREChina, Australia,
SE Asia
https://www.knightfrank.com/research/uk-housing-market-forecast-november-2018-6011.aspx?search-id=&report-id=367&rank=3https://www.knightfrank.com/research/uk-housing-market-forecast-november-2018-6011.aspx?search-id=&report-id=367&rank=3http://www.KnightFrank.com/Researchhttps://www.knightfrank.com/wealthreporthttps://www.knightfrank.com/wealthreporthttps://www.knightfrank.com/research/australian-prime-residential-review-2018-5669.aspx?search-id=&report-id=1243&rank=5https://www.knightfrank.com/research/australian-prime-residential-review-2018-5669.aspx?search-id=&report-id=1243&rank=5https://www.knightfrank.com/research/australian-prime-residential-review-2018-5669.aspx?search-id=&report-id=1243&rank=5https://www.knightfrank.co.uk/research/global-branded-residences-2019-5874.aspx?search-id=&report-id=1617&rank=1https://www.knightfrank.co.uk/research/global-branded-residences-2019-5874.aspx?search-id=&report-id=1617&rank=1
