Based on Knight Frank's latest Prime Global Cities Index (PGCI), which tracks prices in 46 leading prime markets worldwide, fell by 0.4% in the 12 months to the end of March 2023. This marks a sharp reversal from a peak of 10.1% growth in the fourth quarter of 2021.
The slowdown in growth has overwhelmingly been driven by sharply higher interest rates following recent tightening in global monetary policy.
Annual prices are now falling in 16 of the 46 markets tracked. While two thirds of markets are still seeing positive growth, the large size of price declines in the weakest markets has pulled the overall index negative.
At the top of Knight Frank's Prime Global Cities Index of luxury price growth in 2023 is Dubai, with 44% annual price growth, but remains a substantial outlier. The second place city is Miami, the only other metro to reach double digit annual growth (11%) in Q1 of 2023. Zurich (9.4%), Berlin (5.7%) and Singapore (5.5%) complete the top five markets - pointing to the resilience of wealth and, in Berlin's case, investment hubs.
Dubai's 149% growth through the pandemic (March 2020 to date) reflects a market undergoing significant structural change. Miami saw the second strongest growth over the same period, but at only 59% merely serves to highlight Dubai's exceptional market transformation.
New Zealand dominates the lower ranks of the index with Wellington seeing prices fall more than 27% over the past year, followed by Auckland (-17%), and Christchurch (-15.3%). Other weak performers include Stockholm (-11%) and Vancouver (-9.4%), reflecting weakness in their broader national markets.
While the Federal Reserve and other central banks may be closing in on peak rates, it is likely that even prime housing markets will experience continued downward pressure on prices for the next few quarters.
That said, Knight Frank states it is unlikely there will be a correction similar in scale to that seen during the Global Financial Crisis, when the overall PGCI index fell 8.2% from peak to trough during 2009. There are early signs that some markets are seeing improvements, 46% of markets saw quarterly price falls through the second half of 2022, but only 28% did in the first quarter of this year, the lowest number since the first quarter of 2021.