The value of prime property in the world’s key cities fell by 0.4 per cent in the first quarter of this year, representing the index’s first quarterly fall since the depths of the global recession.
Although a milestone, the index’s negative quarterly growth is not surprising. Quarterly price growth has been below 2 per cent since the first quarter of 2010 and it averaged only 0.6 per cent last year.
The first three months this year brought with it little new momentum. The euro zone’s debt debacle remained at the forefront of the global economic agenda, critical elections were on the horizon in Russia, France and Greece, and Asia’s property cooling measures showed no sign of being relaxed. Against this backdrop, some luxury property buyers took to the sidelines to observe their market’s trajectory.
Despite the overall index’s sluggish performance, four prime markets achieved double-digit growth over a 12-month period: Nairobi (24.2 per cent), Jakarta (14.3 per cent), Miami (13.9 per cent) and London (11.3 per cent). Perhaps most surprising is the fact that the top five performing cities were spread across four continents – with Manhattan taking fifth spot (9.2 per cent).
Singapore was placed 14th, falling 2.2 per cent.
London and Singapore, despite the latter’s modest decline, are proof that there is still a level of resilience in the prime markets, with both cities shrugging off the introduction of new stamp duties. In London, both prices and applicant numbers increased despite the rise in stamp duty to 7 per cent for individuals buying homes over £2 million (S$4.02 million).
Here, the additional 10 per cent stamp duty for foreign buyers introduced in December dented demand but not prices, according to Knight Frank Asia-Pacific research director Nicholas Holt.
“Prices not only held up but actually increased slightly at the very top end of the Singapore market in the first quarter of 2012. This was not only due to fairly resilient domestic demand, but also due to wealthy Chinese, Indonesian and Indian buyers who continued to buy in this segment of the market, undeterred by the surtax,” he said.
In our view, the overall index will remain subdued this year, fluctuating between marginal price falls and rises, with London, Moscow, Jakarta, Nairobi and Singapore expected to be the strongest performers.
The safe-haven argument still resonates. Capital flight will continue to focus on cities with low political risk, transparent legal systems, good security and ideally those with a tax regime friendly to high net worth individuals.
By Kate Everett-Allen – a researcher at Knight Frank International Residential Research.