High-end home prices set for slump from Hong Kong to New York
HONG Kong, New York and San Francisco are among at least a dozen major cities heading for a decline in residential property values this year.
More than half of the 30 global cities monitored by Savills will record slower annual growth in residential capital values in 2024, according a report seen in advance by Bloomberg. Overall, the real estate firm expects growth in the values of high-end homes to slow to 0.6 per cent this year from 2.2 per cent in 2023, and the lowest gain since 2019.
High interest rates and political uncertainty in Hong Kong is stoking sales while deterring buyers, and the combination is likely to cause prime residential prices to fall more than 10 per cent this year – making it the softest market tracked by Savills.
“Even though prime residential is less mortgage resilient than mainstream residential property, weaker macroeconomic conditions will dent sentiment,” said Kelcie Sellers, a researcher at Savills. “Many potential buyers and sellers will adopt a ‘wait to see’ approach.”
Markets around the world are caught between sharply higher borrowing costs – likely here to stay – and a shortage of homes that is keeping prices elevated.
Choppier waters caused prime residential markets – which cover the most affluent postcodes in global cities – to see muted growth in 2023, following a post-pandemic surge in demand.
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Alongside Hong Kong, weakness is driven by New York and San Francisco, with the former seeing a muted return to offices and the latter still weathering tech turbulence.
Chinese cities including Shenzhen, Guangzhou and Hangzhou are also poised for declines as the government struggles to stabilise the country’s volatile property market.
Global prime rental values grew 5.1 per cent in 2023 – outpacing capital values in almost every city monitored by Savills – partly driven by increased demand from prospective buyers delaying purchases until interest rates stabilise.
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Lisbon saw the highest rental growth between July and December last year, rising by an average of 22 per cent as demand outpaced supply, following an introduction of rent controls.
Still, easing inflationary pressures is boosting the prospects for homebuyers in 2024. The potential for central banks to cut interest rates this year could surprise on the upside for pricing in the latter part of the year, Savills said.
Sydney and Dubai – both benefiting from an increase in their high-net-worth population – are set to see prices grow as much as 9.9 per cent and 5.9 per cent, respectively. Along with growth predictions in Amsterdam and Tokyo, that helped to keep the average capital value forecast positive across the 30 cities.
Even so, a wave of elections due to take place in almost 70 countries in 2024 could restrict values in more major cities, according to Savills.
“The year ahead is the year of elections, adding an additional layer of uncertainty to the outlook,” Jelena Cvjetkovic, director of global residential at Savills, wrote in the report. “As such, we are expecting lower, but still positive, levels of capital value growth in 2024.” BLOOMBERG
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