Luxury homes in Mumbai could cost less by the end of the calendar year 2019 (CY19). A recent report by Knight Frank on real estate trends titled ‘Global Outlook 2019’ suggests growth in prices of luxury homes across the globe is slowing.
The proliferation of property market regulations, the rising cost of finance, uncertainty surrounding Brexit and in some markets and a high volume of new prime supply are the factors, it says, that are weighing on prime prices. More muted growth is the main story for 2019 forecast, the Knight Frank report says.
However, Knight Frank does not foresee a price crash as seen in 2008, as its Prime Global Cities Index, which tracks the movement in prime prices across 43 cities worldwide is still rising, albeit at the slowest pace since 2012.
“Luxury house prices are now a distinct asset class, a safe asset viewed by the wealthy as a viable alternative to government bonds. However, luxury housing has become more homogenised over the last decade which has led to greater synchronicity when it comes to market cycles. Local policy interventions and economic shifts have the capacity to disrupt these ties but broader macro themes from the rising cost of finance to wealth creation, not to mention the desire to have a foothold in some of the world’s most transparent and prestigious neighbourhoods, will keep them in check,” the report says.
Of the 15 cities monitored, the key European cities of Madrid, Berlin and Paris, topped forecast for 2019 with a growth of 6 per cent. “Still positive, but marginally down on 2018, the normalisation of monetary policy, weaker economic growth and a fragile political landscape post-Brexit will influence demand, but their relative value will remain a key driver,” the Knight Frank report says.
Sydney, London and New York City sit mid-table with forecasts of 0 per cent to 2 per cent growth. Knight Frank expects real estate activity to pick up in London, as changes to stamp duty have now been fully absorbed and political uncertainty in relation to Brexit starts to recede.
As regards New York City, luxury prices are recalibrating as the market grapples with the new federal tax law, higher mortgage rates, and the absorption of high supply volumes in recent years, the report suggests.
At the bottom of the table are Hong Kong, Mumbai and Dubai, which are likely to witness a drop of 10 per cent, 5 per cent and 2.4 per cent respectively in luxury home prices in CY19. The global average stands at 1 per cent.
Prime residential price growth forecast
Year-to-December forecast (%)
New York City
Source: Knight Frank report