Knight Frank's Prime Global Forecast and Head of Residential Research, Michell Ciesielski gives a clear outlook on prime property around the world.
International research of property markets worldwide by Knight Frank has shown that Lisbon, Monaco, Vienna and Shanghai are the only four major prime residential markets set to see price growth throughout the remainder of 2020 as the impact of Covid-19 takes its toll on luxury residential property markets around the world.
Analysis by Knight Frank of 20 cities globally highlights the direction of travel for prime prices in 2020 and 2021 based on projections for demand and supply, the impact of Covid-19 in the different markets and the varying government stimulus measures announced.
Trends to monitor:
With Covid-19 creating a ‘new normal’, Knight Frank has outlined a number of future trends to look out for across prime property markets around the world:
Michelle Ciesielski, Head of Residential Research defined the Prime Global Forecast as being based on the prime residential market which Knight Frank defines as the most desirable and most expensive property in a given location.
"This is generally defined as the top 5 per cent of the market by value," said Ms Ciesielski to WILLIAMS MEDIA.
"Prime markets often have a significant international bias in terms of buyer profile."
The scale of global economic uncertainty is unprecedented and therefore putting an exact figure on forecasts is challenging.
As a result, Knight Frank has placed the 20 cities analysed into four price bands including markets that will see: strong price growth (+5 per cent or more), low price growth (0- 5 per cent), flat or low price falls (0 -5 per cent) and strong price falls (-5 per cent or less).
At the start of the year, Knight Frank predicted a number of markets around the world would see healthy prime price growth.
Paris led Knight Frank’s Prime Global Forecast for 2020 with expected growth of 7 per cent, Miami and Berlin were set to see rises of 5 per cent and prime price growth was anticipated in Geneva and Sydney at 4 per cent respectively.
Liam Bailey, global head of research at Knight Frank said there were positive signs in several markets globally that prime prices would rise throughout 2020 but unsurprisingly, Covid-19 has put a halt to that.
"Of the 20 cities Knight Frank has analysed, 16 of these will see prime price declines in 2020, with only a handful avoiding a fall into negative territory – either because of historic supply shortages or because transactions were able to continue during lockdown and these measures are already being eased," said Mr Bailey.
"Of the cities set to see a decline in prime prices, those likely to be hit hardest are either emerging markets or cities that were already seeing weak price growth at the end of 2019."
Singapore is one exception; Knight Frank predicted prime prices would rise by 3 per cent throughout 2020 but the fall-out of Covid-19 and the length of time the Singapore market has been affected, changes the prediction to a decline of up to 5 per cent.
Australia
In regards to Australia, Ms Ciesielski told WILLIAMS MEDIA that over the coming year, many high-net-worth individuals will review their domicile following the lockdown of many cities around the world.
"Some will want to be closer to the city with a minimal commute, and it’s likely the more desirable locations will be as close to the waterfront or parklands as possible," said Ms Ciesielski.
"Others will now consider basing themselves in a coastal or country lifestyle property with the intention of only travelling into the city when required.
"The demand for waterfront property comes from a variety of buyers, ranging from an emotional purchase, to a sole financial purpose given waterfront properties are generally the most liquid within each market, especially in uncertain times.
"Such locations benefit from their appeal to families upsizing, and downsizers often moving within the local area or seeking a lifestyle change.
"There is also the attractiveness as second home with maritime facilities available."
To be able to pick the exact profile and suburbs of the most popular prestige property in 2020 was too early to tell, in Sydney and Melbourne, according to Ms Ciesielski.
"Although we expect the rightsizing movement to continue, being the downsizing lifestyle trend towards luxury apartment and townhouse living.
"There is still a significant undersupply of this low, or no maintenance accommodation, being built in the prime regions of Sydney and Melbourne over the next three years."
Ms Ciesielski said with the recent currency exchange, there has been increased interest from offshore buyers, and also many Australian expats living abroad.
"Much depends on their stage of life for what type of property they seek, if their intention is to return in the coming months or buy now with the favourable currency to return to Australia in future years," said Ms Ciesielski.
"Those in the finance field are still keen to buy a prime residence in Sydney, and they tend to choose a position dotted around the harbour.
"When returning with a family, Melbourne is considered well-placed for education and Brisbane is emerging for those seeking the alfresco lifestyle with the Sunshine Coast and Gold Coast within close proximity.
United States
Of the three US cities tracked, Miami is expected to perform strongest throughout 2021.
The market was already strengthening in 2019; in part due to the State and Local Tax (SALT) deduction, which heightened Florida’s appeal but, the Covid-19 crisis, has also underlined Miami’s lifestyle advantage for many living in high-density markets.
Los Angeles’ distinct lack of new prime supply should cushion price falls in this market in 2021, whilst in New York, much like London, prime prices have declined in recent years but transactions were beginning to pick-up in early 2020.
There is evidence of safe haven flows from emerging markets in the last few weeks into New York and the volatility of equity markets is prompting some high-net-worth-individuals (HNWIs) to rebalance their investment portfolios giving greater weight to property assets.
Whilst a degree of resilience is expected in terms of prime prices in some markets, sales volumes in all markets have dropped significantly in Q2 2020, although the majority of these markets expect the slowdown to be short-lived with traction expected to be gained in the second half of 2020.
Looking to the future
Kate Everett-Allen, head of international residential research at Knight Frank said they are likely to see a slight rebound in most markets for 2021.
“London and Lisbon sit out in front in 2021, with forecast growth above 5 per cent, said Ms Everett-Allen.
"In Lisbon, Portugal’s handling of the crisis combined with strengthening demand and limited prime supply, will underpin price growth.
"A number of other European markets such as Berlin and Madrid are also expected to rebound well.
“In London’s case, the political certainty provided by last December’s general election boosted housing market confidence during January and February.
"With prices in some areas down as much as 25 per cent over the last five years, we expect a sharp uptick in 2021.”
Outlook:
As we look ahead to the next few weeks and months, we expect to see:
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