Knight Frank launches the Currency Matters 2014 report. It assesses the impact of currency movements on luxury residential markets around the world.
To help gauge the real impact of currency movements worldwide, Knight Frank has created the Global Currency Monitor which calculates real investment returns for international investors by combining changes in prime prices with currency movements.
Key highlights:
• In 2009 the pound had weakened significantly against key Asian currencies. This shift proved influential in attracting Asian interest in the UK capital.
• The good news for those Indonesian, Australian and Chinese buyers who bought in prime London a year ago is that their asset has appreciated rapidly, by 37.8%, 32.5% and 18% respectively.
• Prime prices in Hong Kong rose by 67.9% in the five years to March 2014 but buyers from New Zealand and Australia would only pay 10.2% and 25.6% more than in 2009 respectively due to the strength of their currencies.
• The Yen is increasingly viewed as a ‘safe haven’ currency, having fallen only 0.3% in the first half of 2014 against the pound. Tokyo may increasingly appear on the radar of international investors.
Buying in: Prime London - Time period: Last year
• Due to the strengthening pound over the last 12 months – there are few non-sterling buyers for whom prices in central London have appreciated at a slower rate than for local buyers.
• The currency advantage for Asian buyers looking to purchase in prime central London now has diminished compared to 2009 when the weakness of the pound gave them a significant advantage.
• The good news for those Indonesian, Australian and Chinese buyers who bought in prime London a year ago is that their asset has appreciated rapidly, by 37.8%, 32.5% and 18% respectively.
• But for that same cohort of buyers looking to buy in 2014 the strengthening pound has made a London investment comparatively more expensive.
Buying in: Prime Hong Kong - Time period: Last 5 years
• Prime prices in Hong Kong rose by 67.9% in the five years to March 2014 but buyers from New Zealand and Australia would only pay 10.2% and 25.6% more than in 2009 respectively due to the strength of their currencies.
• In contrast, Japanese or Turkish property owners in Hong Kong may see the current confluence of prices and currency as an opportunity to sell.
• The pegging of the Hong Kong Dollar to the US Dollar largely negates any currency play between the two, leaving buyers from either territory having to rely almost exclusively on price growth if looking to achieve their investment returns.
Currency Trends to Watch
• If the Chinese Yuan is devalued, Chinese buyers are unlikely to be as active in the international property markets as they have been.
• If the sterling strengthens further some foreign owners may take the opportunity for profit taking.
• If the US Dollar rises as expected, demand for prime residential property in those markets favoured by US buyers such as the Caribbean, Italy, Ireland, the UK and France may increase.
• The Yen is increasingly viewed as a ‘safe haven’ currency, having fallen only 0.3% in the first half of 2014 against the pound. Tokyo may increasingly appear on the radar of international investors.