This year, the most important factor affecting prime property markets will be their domestic economic performance. On top of this is a shift in the cost of money and currency, with a slow transition away from ultra low interest rates expected to be led by the US. The strength of the dollar is also expected to encourage dollar-pegged investors to consider UK or European investment options.
Tax is a growing influence on market performance. Over the past 12 months a number of rules aimed at controlling the destination of investment flows were brought in. Three Australian states — Victoria, New South Wales and Queensland — have recently introduced a stamp duty surcharge for foreign buyers of residential property. This is in addition to the new 10 per cent withholding tax on the sale of high-value Australian property by foreign residents. Elsewhere, we will see a capital gains tax for short-term property investments in New Zealand, the additional rate of stamp duty on high-value property purchases in the UK, and an empty-homes tax in Vancouver. Clearly the expansion of so-called cooling measures to control international wealth flows into property shows no sign of easing.
London (0 per cent growth)
The central narrative through 2016 has been one of falling sales volmes and falling prices, but a new realism from vendors has led to a modest uptick in sales in recent weeks. It confirms that demand is very much alive and well, with healthy numbers of prospective buyers waiting in the wings.
While it is true that the EU negotiations on Brexit will provide an uncertain backdrop to the London market next year, let’s not overstate it. Compared with the very real potential for political, banking and economic upset in Italy, Germany, France and other European countries in 2017, the moniker “safe haven” can be expected to be dusted off again in the UK.
Hong Kong (0 per cent growth)
Investment demand will be suppressed by a doubling of the stamp duty rate on second homes, to 15 per cent. However, prices will not drop notably, due to a limited supply of prime properties.
Sydney (5 per cent growth)
The exchange rate is still favourable for foreign investors and expats, but there is limited prime stock on the market.
Miami (-5 per cent growth)
A significant amount of new supply continues to be brought to the market, despite the large amount of existing supply and weaker sales levels. The stronger US dollar since 2014 has also slowed South American demand, in addition to domestic economies in the region weakening, most notably in Brazil.
New York (0 per cent growth)
The backlog of contracts signed one to two years ago, which began to close in 2016 as projects were completed, is expected to end in the first half of 2017. Otherwise, there remains an oversupply of luxury products that will continue to enter the market.
Singapore (2 per cent growth)
Prime residential prices will experience positive growth next year. Recent hikes to stamp duty in Hong Kong might divert homebuying interest to Singapore. With strong economic fundamentals and a stable political climate, Singapore is expected to retain its status as a haven investment destination for both individual and institutional global investors.
Paris (2 per cent growth)
French elections this year may have an impact on foreign investors’ confidence. Wider Eurozone jitters may resurface if German elections deliver a surprise result or if Portugal, Spain, Italy or Greece become headline news again.
Liam Bailey is the global head of research at Knight Frank
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