The resilience of global super-prime property markets
Making sense of the latest trends in property and economics from around the globe.
3 minutes to read
Residential sales in many of the world’s mainstream markets are down by 20% to 30% year-on-year, largely due to the surge in finance costs and its dramatic impact on affordability.
While not immune from slowing activity, our latest Global Super-Prime Intelligence report confirms that global super-prime (US$10m+) markets have been more resilient. Sales in our 12 markets fell only 2.4% in Q3 this year compared to the same period a year earlier.
The total value of super-prime sales – at US$31.7 billion over the most recent 12-month period - has fallen from the 2021 post-pandemic high of US$40.7 billion, but is still well ahead of the pre-pandemic 2019 total of US$18.6 billion.
Performance drivers
The super-prime market is driven by new-build completions to a far greater degree than mainstream markets. Strong sales volumes in 2021 were flattered to an extent by delayed completions from 2020, and to be fair some of the current strength in our global number, especially in London, New York and Miami, have been bolstered by completions in luxury schemes that started before the pandemic.
As we move into 2024, tailwinds from new build sales will weaken as the recent drop off in new project starts begins to feed through.
Super-prime markets are inherently international and the recovery in travel volumes through 2023 have helped to support sales. Global flight volumes are now closing in on 2019 levels.
Five markets saw volumes rise through the last quarter on a year-on- year basis, with Hong Kong, Dubai, Geneva, Miami, and Sydney seeing more sales in Q3 this year against Q3 2022.
Dubai once again leads our ranking of quarterly sales – a position it has held since Q4 2022. London follows in second position, with Hong Kong sitting in third place.
Peak rates, continued
Central bankers from Europe to the US are battling to convince investors that it's too early to think about cutting interest rates. Investors aren't hearing them.
The dollar fell to a three-month low against a basket of key currencies yesterday following dovish comments from Christopher Waller, previously one of the Fed’s most hawkish policymakers. Investors currently believe the Fed and the ECB will begin cutting by June. Some outliers, like famed hedge fund manager Bill Ackman, reckon the first Fed cuts could come as early as the first quarter.
The Bank of England has got its house in order after the views of Governor Andrew Bailey and chief economist Huw Pill appeared to take diverging views on whether it was reasonable to expect the base rate to begin falling over the summer. The Bank is particularly concerned about the rising price of services, which is feeding a view among policymakers that inflation is becoming more “home-grown” and will be “challenging to squeeze out of the system,” according to comments from deputy governor Dave Ramsden.
Swap rates did creep up a little following the announcement of tax cuts in Autumn Statement but have since stabilised. Mortgage lenders remain unfazed - Natwest became the latest lender to announce cuts to its range on Monday. That included rate reductions of up to 26ps and 30bps on selected 2 and 5 year purchase deals.
In other news...
In a sweeping new report, Christine Li revisits the long term demographic drivers of economic growth in Asia-Pacific, and takes a closer look at the resilience of residential markets, the massive ramp up of logistics development activity and the rapid expansion of the living sectors.
Elsewhere - AEW calls the bottom of Europe's commercial property slump (Bloomberg), the UK is Europe’s biggest destination for technology investment (Times), Saudi PIF and Ardian to buy 25% stake in Heathrow airport for £2.4bn (FT), and finally, mortgage rebound slows pace of eurozone credit contraction (FT).