Prime Sydney residential market to fall further next year: Knight Frank
Sydney is one of six global prime residential markets where prices are forecast to fall by up to 5% over 2012, according to Knight Frank.
It is the third straight year that Knight Frank has forecast a drop in top-end Sydney house prices, with the poor 2012 outlook based in part on weaker economic activity.
The other prime markets set to experience similar relatively modest price declines are Ho Chi Minh City (Saigon) and Hanoi in Vietnam, Singapore and the European cities of Bordeaux and Madrid.
In total seven Asia Pacific cities are expected to suffer house price falls in 2012.
Kate Everett-Allen, head of international residential research at Knight Frank, says the slowdown in luxury price performance is most evident in Asia.
“Here, the flood of cheap money brought about by a surge in domestic wealth and stimulus measures in the US and Europe was followed by a wave of monetary tightening measures to squeeze inflation. As a result the annual price growth of luxury homes in Hong Kong, Singapore and Shanghai now stands at 7.8%,” she says.
Luxury house prices are expected to fall in 44% of cities on the Knight Frank’s Prime Global Cities Index with drops of up to 10% expected for Hong Kong, Geneva, Shanghai, Mumbai and Manama (the capital of Bahrain).
No price changes are expected in 12% of cities on the index, while 44% are forecast to experience price growth in 2012 with Moscow and Paris among the strongest performing markets.
According to Knight Frank, the expected drop in price falls in the seven Asia Pacific cities is partly being driven by government regulation, which was brought in after 2008 in an attempt to cool housing markets before they experienced US and European style crashes.
“These steps were bolstered in recent years, as concerns over speculative investment rose and rising household wealth created price pressures. The measures have proved hard-hitting and have included curbing multiple home ownership, halting bank loans for uncompleted projects and increasing interest rates,” the report says.
Outside of Asia, the main reason for price falls in 2012 is the growing global economic uncertainty emanating from the Eurozone and extending to other parts of the world.
Limited supply in several markets is the pivotal factor in pushing prices higher in London, Paris, Moscow, Nairobi and Kuala Lumpur.
Liam Bailey, head of research at Knight Frank, says three key themes will determine the performance of prime city markets in the short- to medium-term: “the scale of global wealth generation, the ongoing search for ‘safe-haven’ investments and the growing divide between the prime markets in the West and the rest of the world”.