THE price for luxury properties increased 2.7 per cent on average across 43 cities in the year to September 2018, according to the latest Prime Global Residential Cities Index Q3 2018 launched by Knight Frank. The price increase represents the index’s weakest performance in annual terms for almost six years.

Knight Frank Asia-Pacific head of research Nicholas Holt said: “Prime residential markets continued to slow in Asia-Pacific in the third quarter (Q3) of 2018, with 13 of 17 regional markets seeing growth decelerate on the previous quarter. Rising interest rates, cooling measures and worsening prospects for global growth are all contributing factors to this region’s prime market slowdown.

“While pockets of out performance remain, these growing headwinds are likely to ensure that sentiment in many prime cities’ residential markets remains muted towards the end of the year.”

Leading the index is Singapore with prime prices up 13 per cent over the 12-month period (Q3 2017-Q3 2018), driven by the limited availability of prime properties and a strong market outlook in the first half of this year.

Analysts in Singapore are expecting a new peak in private home prices by year-end as developers put in the market new launches on land they have acquired at significantly higher prices.

The Urban Redevelopment Authority (URA) showed that private home prices rose for the fourth straight quarter, up 3.4 per cent in the second quarter after a 3.9 per cent increase in the first quarter.

“Hong Kong and Singapore, Asia’s two premier cities, have traded places in the last year. Both cities saw cooling measures introduced over the summer months and although the rate of annual price growth in Hong Kong has already slowed to 5.5 per cent, Singapore may not be far behind with its quarterly growth weakening to 1.7 per cent in the third quarter of 2018,” Knight Frank said.

Kuala Lumpur ranked 29 in the index with prime prices up 0.7 per cent over the 12-month period (Q3 2017-Q3 2018).

Knight Frank expects to see improvements this year in the Kuala Lumpur luxury condominium market on the back of renewed confidence and improving market sentiment.

The firm said in its Real Estate Highlights report for the first half of 2018 that Malaysia is expected to be on investors’ radar after the market stabilises with more clarity in the policies of the newly-elected government.

MIXED PERFORMANCE

According to the index, Europe’s performance is mixed compared with a year ago. Some European cities are still performing strongly (Edinburgh and Madrid), others have swapped spectacular for steady (Berlin and Paris), while for a few, price growth remains in negative territory (London and Dublin).

In London, prime prices dipped 2.9 per cent in the last year as uncertainty around Brexit continued. This trend has been exacerbated by growth in supply as more landlords attempted to sell their property following tax changes.

The year 2018 marks a watershed for the index. The overall narrative of lower growth, which Knight Frank predicted last year, has materialised. The rate of growth has declined for three consecutive quarters and has now reached its lowest rate since the fourth quarter of 2012.

A combination of uncertainty surrounding Brexit, rising interest rates across major economies, a tighter regulatory environment and the remnants of high supply in some markets is impinging on price growth.

The index’s headline figure of 2.7 per cent growth conceals significant variations both within continents and even within countries.

In Canada, for example, Toronto (8.5 per cent) continues to see prime prices rise in its exclusive areas of Rosedale and Yorkville.

Vancouver (-11.2 per cent), however, sits at the bottom of the rankings as upmarket areas such as West Vancouver have seen a marked slowdown in sales and prices as a result of the raft of measures introduced in February’s Budget.

This quarter sees the addition of Auckland to the prime index for the first time. Despite a ban on the purchase of existing properties by overseas buyers from July 1 (excluding new homes), luxury prices increased 8.5 per cent in the year to September.