Posted by Jonathan J. Miller -Monday, November 28, 2011, 10:00 AM
Knight Frank’s research of high end housing markets across the globe shows many of the markets are expected to cool in 2012. They produce an impressive amount of great research on real estate across the globe. I provide some insights within this report.
This process (report) highlights a key risk – that prime markets will ultimately be undermined by domestic economic reality, with a convergence between prime and mainstream market performance. If the euro was to collapse, or a similar catastrophe was to strike, all bets really would be off and we would expect much weaker performance across all of our prime markets.
- After two years of growth the world’s prime markets look set to cool in 2012
- Our forecast for 2012 is evenly split with 44% of the cities monitored forecast to see price falls, 44% likely to experience price rises and 12% expected to remain unchanged
- Given the global economic turmoil it might seem surprising we are forecasting price rises in 44% of the cities monitored. In many of these cities the critical factor is a lack of quality new supply. We expect this to be particularly evident in London, Paris, Moscow, Nairobi and Kuala Lumpur.
- In those cities forecast to see price growth this will be underpinned by the flow of capital from the world’s troubled regions and a desire amongst the wealthy to target property and other real assets over financial products
- Over 60% of the Asian cities monitored are forecast to see price falls in 2012 as government measures aimed at dampening speculative demand start to take effect
- The Eurozone crisis is considered a high risk for 60% of the cities covered. Political and security issues present the greatest risk to the housing markets in the Middle East and Africa.
- Interest rates, high inflation and consumer debt represent the smallest risk to the world’s luxury housing markets reflecting the affluent, more equity-rich buyer profile for this market.
Prime Global Forecast [Knight Frank]