Wednesday 01, March 2017 by Jessica Combes

Luxury house prices in key Middle East cities record marginal declines in 2016

Prime residential property prices in four of the key Middle East/GCC cities recorded marginal declines in 2016, according to Knight Frank’s unique Prime International Residential Index (PIRI 100) which tracks the value of luxury homes in 100 locations worldwide.

“Within the region, lower oil prices and global economic uncertainties impacted investor sentiment resulting in a slowdown in the overall level of transactions. Meanwhile the strengthening of the US dollar impacted the purchasing power of investors from non-USD pegged currencies,” said Dana Salbak, Head of MENA Research Knight Frank. However key to note is that this decline in prime prices has slowed down from 2015 levels. Dubai for example witnessed a -5.5 per cent decline in prime property prices in 2015 versus -4 per cent in 2016. Moreover, the prime market in the emirate continues to outperform the general mainstream residential market, which leaves optimism for the sector, said Salbak.

In Dubai, sophisticated regulations, government commitment to infrastructure spending, and the realisation among developers of the need to phase out projects in line with demand to avoid an oversupply, lead us to believe the real estate market has become more mature and resilient. 

Closer analysis of the PIRI 100 highlights some significant regional variations.

  • Chinese cities outpaced other markets by some margin: Shanghai (27.4 per cent), Beijing (26.7 per cent) & Guangzhou (26.6 per cent). However, new cooling measures, including higher deposit rates and home purchase restrictions, have already been introduced and are having their desired effect of slowing the rate of growth.
  • Australasia was the strongest-performing world region in 2016 with prices rising by 11.4 per cent year-on-year.  
  • Toronto marginally eclipsed Vancouver to take the title of North America’s strongest performer in 2016 with prices rising 15.1 per cent year-on-year.
  • In New York, the strength of the US dollar negated some overseas interest and the delivery of a number of luxury projects helped inflate supply but luxury prices proved resilient rising 3.5 per cent year-on-year.
  • Amsterdam is Europe’s strongest-performing city with prices increasing 10.1 per cent in 2016.
  • The Alpine resort of Gstaad is this year’s top-performing ski resort. Prices here rose 10.0 per cent due to limited supply as the cap on second homes filtered through into the market.
  • Prices in prime central London market slipped 6.3 per cent in 2016 as changes to stamp duty in recent years weakened demand but the final quarter saw activity strengthen as buyers adjusted to the new tax burden.
  • Latin America is one of four world regions which recorded negative growth in 2016. Prices slipped by 2.7 per cent year-on-year.

Knight Frank’s PIRI also looks at how much $1 million can buy in 10 key cities around the world. Monaco for the tenth consecutive year is confirmed as the most expensive city to buy luxury residential property. Here, $1 million buys just 17 square metres of accommodation. This year, New York knocks London out of third place with $1 million buying 26 square metres of prime property compared to London where the same amount can now buy you 30 square metres. Meanwhile in Dubai, $1 million buys 162 square metres of accommodation, making it one of the affordable cities to buy luxury residential property.

 

 

  

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