Slowest Growth Rate Since 2009 Global Financial Crash
According to international real estate consultant Knight Frank's latest Prime Global Cities Index
, which tracks the movement in luxury residential prices across 45 cities globally, registered its lowest rate of annual growth since the final quarter of 2009, when the world was in the grip of the financial crisis.
What's changed? Although still rising, the rate of wealth creation globally slowed in 2018. The last six months saw political and economic headwinds intensify. In the first quarter of 2019, the threat of a global trade war loomed, uncertainty surrounding Brexit peaked and the IMF projected that 70% of the world's economies would see a slowdown in growth in 2019.
Add to this, the rising cost of finance - the US alone has seen nine rate rises since December 2015 influencing not just the US but also the 13+ currencies pegged to the US dollar - and a moderation in prime sales and hence prices was expected.
However, there are exceptions to the rule. As we predicted in our Prime Forecast 2019, key European cities continue to outperform with seven of the top 10 rankings this quarter occupied by European markets. Berlin (14%), Frankfurt (10%), Edinburgh (8%) and Paris (8%) are out in front. All four cities share three key attributes; strong tenant demand, limited new supply and relative affordability.
Moscow (12%) has also risen up the rankings. Prime districts such as Ostozhenka in the Russian capital saw a number of high-end projects launch in 2018 pushing prime prices higher.
In Canada, the gap between Toronto (3%) and Vancouver's performance (-15%) continues to widen with almost 18% percentage points now separating the two cities. Whilst both operate a foreign buyer tax, Vancouver has seen a flurry of additional measures aimed at reducing speculation and curbing price inflation.
Miami leads the four US cities tracked by our index, its appeal boosted by the State and Local Tax (SALT) deduction ruling, which has sparked a rise in the number of US tax migrants heading to Florida given the absence of income tax and inheritance tax as well as favorable corporate tax rates.
New York (-5%) and London (-5.1%) are almost level pegging although London is arguably further ahead in its market cycle as new buyer registrations are starting to build. From 1 July, New York will see the introduction of a new Mansion Tax, applicable to both residents and non-residents, the tax will be a graduated levy based on the purchase price.