Luxury housing markets performed better than expected last year, with 66 of the 100 markets featured in Knight Frank’s Prime International Residential Index (PIRI) seeing growth and prices, on average, rising by almost two per cent.

“Looking ahead, the picture for 2021 is a similar one, with prices again predicted to rise by an average of two per cent but, as our selection of 25 prime locations shows, within this there is wide variance in forecast performance,” says Knight Frank in its latest wealth report.

The global real estate consultancy says Seoul led the growth with seven per cent. “Despite 20 rounds of cooling measures, demand continues to outstrip supply in a city with a population larger than that of either London or New York.

“Shanghai and Cape Town share second place with a five per cent mooted rise, albeit for contrasting reasons. Economic recovery in the Chinese Mainland’s commercial hub is already well underway with China’s gross domestic product [GDP] forecast to grow by over eight per cent in 2021.”

In Cape Town, Knight Frank says prices are rising from a low base, having seen a decline on the back of economic weakness, currency volatility and the drought of 2018.

“Miami, Lisbon and Auckland share fourth place with a price growth of four per cent. We expect pent-up demand, a benign tax regime and low interest rates to be their respective drivers.”

The property consultancy believes that London is one of a number of locations set to see a three per cent price growth this year. “A stamp duty holiday, an end to Brexit-induced political uncertainty and the potential relaxation of international travel restrictions will likely offset a new surcharge for foreign buyers and a potential strengthening of the pound.”

Knight Frank adds that markets such as Auckland and Vancouver, which saw strong pent-up demand post Covid-19 lockdowns, will see sales volumes and price growth moderate.

“Policymakers in both markets have a proven track record of intervening to curtail price inflation.

“Sydney, Singapore and Los Angeles sit mid-table with a forecast price growth of three per cent. All have seen tight prime supply levels exacerbated by the pandemic.”

The property consultancy says US cities have the capacity to surprise on the upside in this year.

“If the dollar weakens to the extent some analysts are predicting, this could motivate more overseas buyers. A rethink of the state and local tax deduction could also be on the cards, redirecting attention back to states such as New York and California.”

Meanwhile in Europe, Knight Frank says steady and sustainable growth (three per cent) is the outlook for Berlin, Paris and Madrid, with comparative value, limited new stock and the delivery of high-grade projects to their respective market drivers.

“All three cities have regeneration projects planned in the coming decade that will upgrade stock and improve accessibility.

“Only two cities, Dubai [minus two per cent] and Buenos Aires [minus eight per cent], are forecast to see prime values decline.”

Knight Frank notes that Latin America, with a limited vaccine rollout, is set to recover more slowly than other regions.

“Dubai’s rate of price decline should slow as travel restrictions ease and the postponed Expo 2020 [hopefully] takes place.”

When it comes to predicting the outlook, Knight Frank qualifies that forecasting during turbulent times is “fraught with risk”.

“Notwithstanding a global pandemic and the largest economic downturn since the Great Depression, we came within fewer than three percentage points of getting it right in 11 of the 25 markets tracked and we were firmly on the money with Vienna and Mumbai, where our forecast was accurate to within less than half a percentage point.

“Auckland and Vancouver wrong-footed us but, in our defence, a pandemic-fuelled post-lockdown surge was hard to foresee at the end of 2019.”

Knight Frank says its European city forecasts proved mixed. “We were within one percentage point when it came to Lisbon, Geneva and Monaco, but less accurate in relation to Paris, Madrid and Berlin. All posted weaker price growth than we envisaged, as international travel bans clipped the wings of investors and prime buyers alike.”

THE STAR (MALAYSIA)/ASIA NEWS NETWORK