Residential Research

PRIME GLOBAL CITIES INDEX Q4 2018

PRIME CITIES UPDATE 2018 was a year of moderation when cooling measures, rising interest rates and for some cities, strong supply, combined to constrain price growth.

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THE IMPACT OF THE RISING COST OF FINANCE Interest rate vs Prime Price Index, 2018

Source: Knight Frank research, Macrobond

Q4 2018 RESULTS

The index grew by 1.8% in 2018, its weakest annual rate of growth since the final quarter of 2009 when luxury housing markets were in the grip of the global financial crisis.

Slower growth in 2018 can be attributed to several factors including the rising cost of finance, stringent property regulations and a surge in delivery rates in some markets which has led to higher inventory levels.

Edinburgh leads the index for the first time, registering annual growth of 10.6%. The prime market has been underpinned, in part, by a release of pent-up demand following a prolonged period of subdued performance as the market adjusted to changes to property taxation as well as political uncertainty.

Accompanying Edinburgh in the top ten are Berlin (10.5%), Madrid (8.1%) and Paris (5.3%), three European cities that have come under the spotlight in recent years due to their comparative value and solid market fundamentals.

Dublin is following a different course with prices down 2.8% in 2018. A further tightening of lending rules by the Central Bank, along with the uncertainty surrounding Brexit and an increased supply of homes for sale has had a moderating effect on the market, although the economic backdrop remains healthy.

Across Asia, Singapore (9.1%) was the region’s top-performing city whilst Taipei (-1.5%) was the weakest. Beijing (4%) is outperforming Shanghai (0.1%) and last year’s frontrunner Guangzhou (2.3%) has slipped down the rankings to 19th place. Hong Kong, where a sluggish stock market and higher lending rates have dampened demand saw luxury prices edge just 1.8% higher in 2018.

Cape Town (3.8%) saw luxury prices moderate in 2018 as land expropriation plans and a severe drought dented sales activity. However, the final quarter saw buyer confidence increase as greater political clarity emerged.

Of the six luxury markets tracked across North America, San Francisco (7.8%) witnessed the strongest price gains and Vancouver (-11.5%) the weakest. A buoyant local market explains the US tech capital’s high ranking whilst a range of new taxes aimed at overseas and speculative buyers pushed prices in Canada’s third largest city lower.

New York (-2.5%) and London (-4.4%) followed similar paths in 2018. Four US interest rate rises and the build-up of new supply across Manhattan saw prime prices soften as inventories expanded. In London, despite sales volumes declining in 2018, the number of new prospective buyers increased 8% between January and November 2018. This pent-up demand may put upwards pressure on pricing once the current political uncertainty surrounding Brexit recedes.

EDINBURGH THE CITY WITH THE STRONGEST RATE OF ANNUAL PRICE GROWTH

AVERAGE ANNUAL PRIME PRICE GROWTH ACROSS 43 CITIES

PERCENTAGE OF CITIES WHICH RECORDED AN INCREASE IN PRIME PRICES YEAR-ON-YEAR

2. 72%

AUSTRALASIA STRONGEST-PERFORMING WORLD REGION IN 2018

2. 72%

KNIGHT FRANK’S PRIME GLOBAL CITIES INDEX TRACKS THE MOVEMENT IN PRIME RESIDENTIAL PRICES ACROSS 43 CITIES WORLDWIDE USING DATA FROM OUR GLOBAL RESEARCH NETWORK. COMPILED QUARTERLY, THIS IS A VALUATION-BASED INDEX TRACKING THE TOP 5% OF THE HOUSING MARKET IN MOST CITIES.

1.8%

THE NUMBER OF YEARS SINCE THE INDEX RECORDED ANNUAL GROWTH LOWER THAN 1.8%

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Notes: Data for New York relates to Manhattan; Data for New York, Los Angeles, Miami, and San Francisco is to October 2018. Data for Berlin, Frankfurt, Dubai, Vancouver and Toronto is to November 2018. Data for Stockholm relates to 1 Jan 2018 to 5 Dec 2018. The price change for Tokyo relates to all properties above JPY100m. The data for Berlin relates to those properties in the 95th quintile which are located in the central area of Berlin. ¹ Based on top-tier of mainstream market in metro area. ² Based on all contracts above Yen100m. 3 Provisional

Sources: All data comes from Knight Frank’s global network with the exception of Tokyo (Ken Corporation); New York (StreetEasy); Los Angeles, Miami and San Francisco (S&P CoreLogic Case-Shiller); Berlin and Frankfurt (ImmobilienScout 24); Stockholm (Svensk Maklarstatistik); Toronto (Real Estate Board of Toronto); Vancouver (Vancouver Real Estate Board); Zurich and Geneva (Wüest Partner); and Dubai (Property Monitor)

KNIGHT FRANK PRIME GLOBAL CITIES INDEX, Q4 2018 Ranked by annual % change

PRIME GLOBAL CITIES INDEX

Please contact us for further informationIf you’re thinking of buying or selling, or would just like some property advice, please do get in touch.

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PRIME GLOBAL CITIES INDEX Q4 2018 Annual performance over the last five years: 12-month % change

Source: Knight Frank Research. *Provisional.

Research enquiries:Liam Bailey Global Head of Research +44 20 7861 5133 liam.bailey@knightfrank.com

Kate Everett-AllenInternational Residential Research +44 207 167 2497 kate.everett-allen@knightfrank.com

Press office:Astrid Recaldin+44 20 7861 1182 astrid.recaldin@knightfrank.com

City World Region 12-month % change

3-month % change

1 Edinburgh Europe 10.6% 1.4%

2 Berlin Europe 10.5% n/a

3 Singapore Asia 9.1% 0.0%

4 Madrid Europe 8.1% -0.8%

5 San Francisco¹ ³ North America 7.8% 1.8%

6 Tokyo² Asia 6.8% 1.0%

7 Toronto North America 6.3% -0.3%

8 Paris Europe 5.3% 0.8%

9 Frankfurt Europe 5.1% 6.2%

10 Los Angeles¹ ³ North America 4.9% -0.7%

11 Moscow Russia & CIS 4.3% -1.9%

12 Auckland Asia 4.1% 0.0%

13 Beijing Asia 4.0% 0.8%

14 Cape Town Africa 3.8% 3.8%

15 Miami¹ ³ North America 3.3% -2.8%

16 Sydney Australasia 3.1% 1.2%

17 Brisbane Australasia 3.0% 2.3%

18 Jakarta Asia 2.6% 1.9%

19 Guangzhou Asia 2.3% -3.6%

20 Melbourne Australasia 2.2% 1.4%

21 Perth Australasia 2.1% 1.4%

22 Monaco Europe 2.0% -0.4%

23 Hong Kong Asia 1.8% -2.0%

24 Delhi Asia 1.4% 0.0%

25 Bengaluru Asia 1.1% 0.0%

26 Kuala Lumpur Asia 1.0% 0.0%

27 Vienna Europe 0.7% 0.2%

28 St. Petersburg Russia & CIS 0.7% 0.4%

29 Mumbai Asia 0.3% 0.3%

30 Milan Europe 0.2% 0.0%

31 Shanghai Asia 0.1% -2.3%

32 Bangkok Asia -0.7% -0.2%

33 Zurich Europe -1.0% -4.1%

34 Taipei Asia -1.5% 4.7%

35 Geneva Europe -2.0% -2.3%

36 Stockholm Europe -2.3% -1.3%

37 New York North America -2.5% -2.0%

38 Dublin Europe -2.8% -0.6%

39 Dubai Middle East -3.4% 1.3%

40 London Europe -4.4% -1.7%

41 Nairobi Africa -4.5% -2.6%

42 Istanbul Middle East -10.4% -4.3%

43 Vancouver North America -11.5% -2.4%