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The latest Knight Frank research on worldwide luxury property prices finds that moderation is the watchword. Price rises have slowed over the last two years. However, European cities show sharp rises in prices and dominate the listings for the highest increases in luxury residential property.

Slow down in luxury property prices

The Knight Frank Prime Global Cities Index for Q1 this year reveals that prices for luxury residential property went up globally by 1.3% in the year. This is the lowest rise since Q4 2009, although prices have risen worldwide by 57.4% over the last decade.

The Index attributes the slow down in price rises to several factors. Notably, political uncertainty in scenarios such as Brexit and the US-China trade wars as well as economic challenges. The increase in the cost of borrowing also explains the lower rise in luxury property prices.

Europe leads the way

However, although globally prices may only have risen 1.3% in the year, European cities tell a different story. They occupy seven out of the top ten places for the highest increases in luxury property prices. Berlin takes the top position with a 14% rise in the year. Frankfurt isn’t far behind in second place with a 10% hike in property prices. Edinburgh and Paris complete the top four, both with an increase of 8%.

According to Knight Frank, the top-performing European cities have three key factors in common. Demand for rental accommodation remains strong in the cities where there is also a limited supply of new luxury homes. All four also offer relative affordability.

Quarterly rises

Berlin also stands tall when it comes to quarterly rises in luxury property prices. The German capital tops the table with a 4.5% rise between Q4 2018 and Q1 2019. Delhi lies hot on its heels with a 4.4% increase with Frankfurt, also a top performer for year-on-year comparison, in third position with 3.8%.

Curbs on price hikes

Some cities have seen marked drops in prices for luxury properties. Vancouver is a case in point. The Canadian city has experienced several years of price hikes, which the authorities have tried to curb. In addition to the foreign buyer tax, Vancouver has also introduced other measures to rein in prices. As a result, prices in the city went down by 14.5% in the year to Q1 and dropped by 3.4% in the quarter.

Frank Knight reports that New York is due to introduce a Mansion Tax from 1 July this year. Applicable on all property purchases in the city, the measure may well curb prices in the Big Apple still further. They fell by 5% in the year to Q1 2019.

Negative territory for some

Numerous cities in the Index saw luxury property prices fall in value in the 12 months to March this year. As well as Vancouver, which saw the largest drop, prices plummeted in Istanbul (down 9.9%) and Auckland (down 7.5%). Nairobi completed the bottom four with a 6.5% decrease in property prices.

Istanbul also features as one of the cities with the biggest drop in quarterly terms. Luxury homes saw a 5.1% drop in value between Q4 2018 and Q1 this year. Vancouver wasn’t far behind with a 3.4% decrease, closely followed by Singapore (down 3%).

(Source: Knight Frank)

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