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Dubai: Extremes of weather and politics need not put the squeeze on London’s prospects as the go-to place for global investors seeking the comfort of luxury properties. But if they are looking for prime residential property with the highest likelihood of value gain, they should aim for Down Under and specifically Sydney (where gains on a year-on-year basis could touch 10 per cent).
This is as per the consultancy Knight Frank’s forecasts on cities where upscale homes are likely to fare best. Those in London could inch up, according to the consultancy, by 2 per cent this year and adding to the 1 per cent gain recorded in 2015.
‘Higher transaction costs (a 3 per cent increase in stamp duty for buy-to-let properties and second homes), political risk around the mayoral election in May, and ongoing affordability concerns’ are being cited for the relatively weak growth patterns.
But the overall scenario for global luxury buying will be less than stellar this year. “The Fed’s recent rate rise and the impact of geopolitical tension on the world’s top cities are currently considered the highest risk,” said Kate Everett-Allen, International Residential Research at Knight Frank.
“In previous years, the Eurozone and its potential break-up was the top threat to economic and property market stability… but jitters over its demise have subsided as the ECB has announced an extension to its QE programme. Instead, emerging markets and the risk of potential deflationary cycles represent the major headwinds for the global economy.”
Apart from more Fed rate hikes, there is no more pressing concern than what is happening to the Chinese economy and by extension what that would mean for the cherry-picking its billionaires engage in across assets and cities. Then there is the long shadow recent terror events can have on cities.
‘The impact of terrorism/geopolitical tension on the world’s top cities are currently considered the highest risks to luxury-city markets,’ the report cites.
The China situation is the factor that will drag down prospects for Hong Kong’s high-end residential market, expected to end this year down 5 per cent and be the ‘weakest performing’ in the Knight Frank luxury rankings. The other two under-performers will be Singapore and Paris, the latter’s chances hurt by ‘the recent terrorist attacks… (which) will undoubtedly affect buyer sentiment and will mean some buyers delay investments. With a Presidential election less than 18 months away, however, we do not expect any radical shake up to the tax structure for foreign buyers and the city remains competitively priced compared to other top global cities’.
As for the main-line US destinations for luxury home picks, those in New York still had enough momentum going for them, though not at the “frenetic pace observed in 2013 and 2014 due to the strength of dollar and weaker economic conditions worldwide, although it is not expected to impact price trends until 2017”, the report adds.
“With the US federal and presidential elections due in November 2016, both New York and Miamiare likely to see buyers adopt a wait-and-see approach. In Miami’s case, the performance of the dollar against key South American currencies and the euro will influence demand/capital flows.”
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Source: Manoj Nair, Associate Editor, gulfnews.com