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The outlook for prime residential property investment in 2016

Prime residential property investment performance over the next years in ten key cities is expected to be lower than in 2016 as global phenomena affect local economies. Top-ranking cities will once again be headed by Sydney with property in Miami and New York featuring in second place. This BRIC Group news article provides the full picture.


The recent Prime Cities Forecast Report by Knight Frank looks at the expected performance for luxury property investment in ten cities across the globe for this year. The choice of cities includes capitals such as London and Paris as well as two representatives from the US – New York and Miami – Sydney and the biggest Asian property markets (Hong Kong, Singapore and Shanghai).


Luxury property investment in 2015

Regarding property price increases last year, Knight Frank reveals that Sydney experienced by far the highest hikes. Prime property in Sydney went up by 15 per cent last year and forecasts point to another high increase during 2016. In second place was Shanghai property with a 10 per cent rise, followed by prime real estate in New York and Miami (5 per cent increase).


At the other end of the scale, prices for property in Geneva, Paris and Singapore fell during 2015. Paris experienced the biggest fall – 5 per cent. Prime property in London and Hong Kong saw negligible increases of around 1 per cent.


Prime property investment risks

To find out which city markets will see the best performances for luxury property investment during this year, Knight Frank assesses the risks facing the markets. According to the real estate advisory service, two factors will be fundamental in their effects on prime residential property: the slowdown in the Chinese economy and the gradual rise of interest rates in the US.


Knight Frank compiles a Risk Monitor with a list of ten factors (local and global) and evaluates the cities’ exposure to each. These factors include the decrease in GDP growth in China, a slowing economy both worldwide and within individual countries, currency risk and market regulation in the different countries.


On a scale of one to ten, Knight Frank finds that prime residential property in Monaco presents the lowest risks in 2016 with a score of 5.2 out of 10. London is close behind with 5.3 points. The city with the highest perceived risk for its luxury property market is Miami (6.3 out of 10) with Sydney just 0.2 points lower.


Luxury property investment forecasts for 2016

The global figure for price rises in 2015 in luxury property in the ten cities featured on the Report is around 3 per cent. Knight Frank believes that this figure will drop to just over half (1.7 per cent) this year, confirming their view that “lower returns will become the norm in the short to medium term”.


In terms of individual city performance, Knight Frank forecasts that Sydney will once again lead the prime residential property investment index, although the predicted rise of 10 per cent is 5 per cent lower than in 2015. Monaco moves into second place along with New York where the price increases on prime property will be around 5 per cent.


The rankings at the opposite end of the table shift slightly during 2016. Prices for luxury property in Geneva should remain static this year after the losses in 2015. Paris and Singapore property will continue to lose value in 2016 with decreases of 3 and 3.3 per cent respectively. At the bottom of the table is prime residential property in Hong Kong, expected to fall by 5 per cent in price.


For Managing Director of BRIC Group Dies Poppeliers, the Report reiterates the continually changing face of property investment particularly in niche markets such as prime residential real estate in large cities. “These findings underline the necessity to carry out extensive research and due diligence on a particular market before investing,” he says, “although luxury property generally has excellent long-term investment value.”


BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.


Source: Knight Frank

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