According to UK-based Knight Frank latest Prime Residential Prices Index, luxury residential property prices across the global index's 32 cities rose by 6.2% on average in the year to June 2014. Luxury homes in key US cities are now increasing in value at a faster rate than those in several European and Asian cities. Of the 32 prime residential markets tracked by the index, 27 recorded positive annual price growth in the year to June 2014, up from 21 a year earlier.
World Regions Average Annual Price Change 2014:
North America up 14.5%
Middle East up 7%
Global Average up 6.2%
Asia Pacific up 5.3%
Europe up 3.5%
Africa up 3.2%
Jakarta and Dublin stand out due to their stellar performances, ending the year to June 27.3% and 23.5% higher respectively. However, in both cases the rate of growth has slowed in the second quarter.
In Dublin's case, the rate of growth slowed from 5.6% in the first quarter to 2.1% in the second. However, given Ireland's improving economic landscape and the expiry of Ireland's capital gains tax incentive at the end of 2014, we expect prime prices will continue their upward trajectory in the second half of the year.
In Dubai, prime prices rose by 6.3% in the year to June, down from 11.7% last quarter. The mortgage cap and doubling of transfer fees at the end of 2013 influenced buyer activity more than forecast. New research by Knight Frank revealed 25%-35% of purchases are mortgage financed in the Emirate, more than previously thought.
However, with new supply at the prime level looking limited over the next 18 months we expect prices to strengthen in the remainder of 2014.
Kate Everett-Allen, head of International Residential Research at Knight Frank noted last quarter the improving performance of luxury homes in North America. "This trend has continued in the second quarter with New York, Los Angeles, Miami and San Francisco all recorded double-digit annual price growth, placing them in the top 10 rankings", said Ms. Everett-Allen.
With the gradual withdrawal of stimulus measures in the US and the UK, the prospect of rising interest rates and the continual enforcement of cooling measures across much of Asia, it would be logical to assume the index's performance would be weakening.
However, the index's annual increase of 6.2% in the year to June is above the long-run average of 4.6% recorded since Lehman's collapse in the third quarter of 2008, underlining the extent to which prime property has become a favored asset class globally.