According to Knight Frank’s latest Prime Global Forecast report, although global response to the financial crisis has helped boost the prime global residential markets, the unwinding of stimulus poses some challenges.
Key highlights of Prime Global Forecast Q4 2013:
• In Asia, the volume of cheap money has been such that governments have begun intervening in property markets
• The weight of money leaving China, and landing in markets like Hong Kong and Singapore has led to a political reaction, including significantly increased levels of stamp duty in Hong Kong and Singapore and maximum loan-to-value rates capped in China
• Rising interest rates and government intervention in the form of buyer restrictions pose the greatest threat to luxury residential markets worldwide
• An improving economy as well as the search for regional safe havens are considered the best means of boosting investment and driving inward capital flows
• Dubai is forecast for the largest growth with a 10–15% increase in prime residential prices in 2014
• Price growth in Beijing, Shanghai, Sydney and Paris is forecast to be between 5% and 10%
• London prime property prices are expected to rise by less than 5%
• Hong Kong is set to see a 5–10% price drop in the luxury residential market
Trends and influences in 2014
Thomas Lam, Director and Head of Research & Consultancy, Greater China at Knight Frank expects that prime residential prices in Hong Kong will fall in 2014 but the luxury end of the market will be better insulated than the city’s wider housing market. Increased supply and the continuation of stringent cooling measures will be responsible for the reduction in prime prices. Supply in 2014 will focus on the New Territories, in particularly Tai Po, Tseung Kwan O and Yuen Long.
Thomas continues, “The Hong Kong residential market has turned and entered a downward phase. Residential prices will decline in the coming few years, but significant corrections are not expected amid a low mortgage rate environment. The only uncertainty will be from the US – the tapering of QE3 and a potential interest-rate rise.”
In China, no further property market cooling measures were announced in the Third Plenary Session of the Central Committee held in November 2013. The current policies are temporarily suppressing demand by restricting home prices and purchase, but Thomas expects the Central Government will tackle the bubble problem by introducing more long-term mechanisms, such as implementing a property tax, increasing land supply or regulating bank loan policies. He expects cash-rich developers, buoyed by issuing bonds and selling homes in 2013, to continue to acquire land in the core areas of China’s first and second-tier cities at a fast rate in 2014.