Global luxury prices increased +2.7% in Q3 2018, according to the Knight Frank Prime Global City Index that tracks 43 major gateway cities around the world. This 2.7% increase is the slowest rate of luxury price growth since 2012.
Obviously, growth rates vary city to city BUT this growth slowdown is pronounced as central governments in different countries and regions enact macro market cooling measures such and imposing foreign buyer taxes and increase g interest rates.
Liam Bailey, the global head of research with Knight Frank, said, “The rising cost of mortgage rates…is acting to constrain the ability of purchasers to bid prices higher…As prices have risen over the past decade…even prime markets are seeing stretched affordability…”
Take a look at Knight Frank’s city rankings with respective price changes:
City Rank 12 Month Change 3 Month Change
Singapore 1 +13.1% +1.7%
San Francisco 4 +9.5% +1.2$
Tokyo 5 +8.6% +1.8%
Guangzhou 10 +6.3% +1.5%
Paris 13 +5.6% +2.7%
Hong Kong 14 +5.5% +0.9%
Berlin 15 +5.4% +7.5%
New York 34 -0.3% -0.6%
London 38 -2.9% -1.4%
Vancouver 43 -11.2% -4.8%
This new cycle of prime market, luxury price slowdown is being led by China where several of its top tier cities posted double-digit gains through 2016 and early 2017. Guangzhou, for example, ranked #1 in Q1 2017 with a +36.2% annual price appreciation and today it ranks #10 with a +6.3% increase. Despite this international rankings drop, Guangzhou continues to rank #1 in its own country.
Singapore’s fastest growing market is largely due, according to Knight Frank, to the very limited supply of prime properties and a strong market outlook during the first half of 2018. Nothing lasts forever as its +13.1% increase is expected to cool in the second half of 2018 as the government tightens mortgage loans and increases buyer stamp duty rates.
Edinburgh, Scotland follows Singapore with a +10.6% price increase in luxury properties. Madrid, Spain ranks third with a 10.1% price increase
Knight Frank acknowledges San Francisco, the strongest US market with luxury prices increasing by +9.3%, as “…a standout market, geographically constrained, with an enormously successful local and regional economy, demand rising exponentially while supply is not sufficient to meet this demand.”
Make sure to notice that prices of luxury properties in Vancouver, Canada’s largest and priciest market, decreased -11.2% y/y in Q3 2018.