Prime Real Estate in Major Markets Up

Knight Frank’s Prime Global Cities Index indicates a rare increase in average value for prime properties in key cities. Experts say the 1.4% quarterly jump is due in …

Knight Frank’s Prime Global Cities Index indicates a rare increase in average value for prime properties in key cities. Experts say the 1.4% quarterly jump is due in no small part to growth in emerging Asian markets like Bangkok and Jakarta. The quarterly gain does not approach pre-recession levels, although the Index has not seen a jump so big for the past 18 months. Meanwhile, experts speculate that growth in Europe’s key cities is driven by the Eurozone’s debt crisis and the risk-averse investment climate that has taken hold there. For more on this continue reading the following article from Property Wire.

The value of prime property in the world’s key cities rose by 1.4% in the second quarter of 2012, the latest report from Knight Frank shows, but a more muted outlook is predicted.

Although some way off pre-recession levels, it has been 18 months since the firm’s Prime Global Cities Index achieved a similar rate of quarterly growth. 

Since its low in the second quarter of 2009 the index, which tracks the performance of the top 5% of mainstream housing markets, has been largely subdued, recording average quarterly growth of 0.8%.
The buoyant Asian markets kept the index in positive territory up until the first quarter of 2012 when cooling measures, and in particular restrictions on second home ownership led to a fall of 0.4% in the first quarter of 2012.

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That said, Asia and Europe have proved critical to the index’s recovery in the second quarter, says the index report. Prime prices in Asia rose by 3.4% in the year to June, the equivalent figure in March was -2.5%.
Similarly, prime prices in Europe rose by 1.3% in the year to June, an improvement on the -3.4% recorded in the year to March.

The report says that Asia’s resurgence in the second quarter can largely be attributed to the strong performance of its emerging markets, namely Jakarta and Bangkok, rather than its traditional powerhouses of Singapore and Hong Kong.

The growth in Europe’s prime prices has taken place despite, or possibly because of, the deepening  Eurozone crisis. With the prospect of more bailouts looking increasingly likely, prime buyers and investors seem to have separated European cities into different tiers.
Buyers and investors are no longer just concentrating on those cities that attract a high level of international demand and a good quality of life but the latest results suggest they are increasingly seeking prime property in those cities best sheltered from the European Union debt debacle.

London, Geneva, Zurich and Vienna are all positioned in the top half of the results table having recorded annual price growth of 10.5%, 6.0%, 5.9% and 3.8% respectively.

According to James Price, of Knight Frank’s international residential development team, the positive performance of some of the more established cities in Europe and the US suggests that a flight to safety remains the defining characteristic of international purchasers and investors.
‘The appeal of cities in stable economies is being brought into marked contrast with the investment environment in weaker countries. This city level data should not however be taken as a reflection of the whole country. Prime second home destinations outside the cities may still perform well in a poorer performing wider market,’ said Price.

Despite the positive results in the second quarter, the overall outlook for the world’s prime markets is muted. ‘We are unlikely to see significant sustained growth given the numerous downside risks facing the global economy. Europe’s economic frailty together with the introduction of more protectionist measures in Asia aimed at improving affordability for domestic buyers, is expected to inhibit price inflation within both the mainstream and prime markets for the remainder of 2012,’ he added.

This article was republished with permission from Property Wire


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