Toronto leads the world in prime property price growth at 27 percent annually
International property consultant Knight Frank says that until now, the pandemic-fuelled house prime boom was most evident in the mainstream market, but the world's prime luxury sector has now surged ahead.
Prime residential prices across 46 cities increased at an average rate of 8.2% in the year to June 2021, up from 4.6% in March.
By comparison, mainstream prices across 150 cities increased by 7.3% on average in the year to Q1 2021.
Toronto leads this quarter's results recording annual prime price growth of 27%, driven by strong buyer appetite and low inventory levels. Despite a recent raft of cooling measures, the next three rankings are occupied by key Asian cities - Shanghai (21%), Guangzhou (20%) and Seoul (20%). Miami (19%) completes the top five this quarter.
Interestingly, the proportion of cities registering prime price growth has increased only marginally to 76%, instead it's the scale of growth amongst the top performing cities that is behind the index's acceleration. Last quarter, the top-performing city recorded annual prime price growth of 19%, and three months later, four cities exceeded this threshold.
Other hotspots include Canadian and US cities which, on average, registered annual price growth of 16% over the 12-month period.
What's driving prices higher?
Housing markets are undergoing the most unusual of recoveries. An easing of travel rules in some markets, a surge in safe haven purchases by domestic buyers, a flurry of activity ahead of the tapering of stamp duty holidays, and an overall reassessment of lifestyles and commuting patterns, all set against a backdrop of low interest rates.
Talk of housing bubbles are grabbing headlines worldwide but we expect the prospect of rising interest rates, government intervention and the withdrawal of stimulus measures to rein in the market's exuberance in the second half of 2021.
Expect more cooling measures as policymakers grapple with the affordability conundrum. The Chinese mainland's long debated national property tax now looks more likely.
Knight Frank expects to see London, New York, Paris and Dubai move up the rankings in Q3 as travel restrictions ease and international buyers start to recognize the relative value in these cities.