HONG KONG
State of the market: Always near the top of any list of the world’s most expensive homes, prices in Hong Kong hit a new record this May on the back of strong demand and ample liquidity. However, some agents speculate that the market may soon turn a corner after a seven-year rally.
A duplex in Frank Gehry’s super-prime Opus went for HK$497 million (about Dh236 million), setting a record as Asia’s most expensive flat. “The property price is continuously upswinging,” says Alan Man, Director and Head of Sales Division — Hong Kong, Sotheby’s International Realty.
An official index of overall private home prices for May edged up 1.1 per cent year-on-year to 298.4 points. That’s 20 per cent higher than the year before and a second straight monthly gain, Reuters reported. Home prices have risen more than 7 per cent so far this year, and have jumped over 170 per cent since 2008 due to low interest rates and a supply shortage, shrugging off a series of government cooling measures, including a 15 per cent tax on foreign buyers.
Looking ahead: Despite the introduction of policies designed to combat speculation, such as double stamp duty and a higher stamp duty for foreign buyers, demand for prime properties has outpaced supply. “Transactions in first and second [tier] of a niche market are still on a positive note and on an upward trend,” Man says.
But the sector looks to be losing steam. Market volatility and a slowing economy may have contributed to a drop in the average number of property transactions compared to the past seven years. Accordingly, developers are offering steeper discounts, low down payments and high commissions, the South China Morning Post reported. “The stock market rout will add pressure for a downward adjustment and we may see a turning point in the last quarter,” the paper quoted Alfred Lau, an analyst at Bocom International, said. as saying. Lau had earlier estimated home prices would fall 10 per cent this year, and 20 per cent if interest rates rose, hurting the city’s economic outlook.
NEW YORK
State of the market: Real estate in one of the world’s most expensive boroughs touched new highs recently. The average sales price for a Manhattan apartment hit $1.87 million (Dh6.9 million) in the second quarter, data from real estate broker Douglas Elliman shows. The median sales price was the second highest of all time, at $980,000.
Deals worth a record $29.4 billion were made on Manhattan property in the first half of 2015, according to JLL, part of a five-year real estate rally that’s pushed prices to new highs in big US cities.emand from new investors has been described as insatiable, Bloomberg reported, quoting agents and brokerages. “There are a lot of new people coming into the market and a lot of people who have raised money to purchase development opportunities,” Robert Knakal, chairman of New York investment sales at brokerage Cushman & Wakefield.
Those prices are deterring some buyers, who perhaps fear a property crash. Total sales volume fell by 20 per cent year-on-year, marking a fourth straight quarter of declines, according to Douglas Elliman.
On the other hand, low inventory levels and strong demand will continue to push up prices and transaction numbers, particularly at the premium end, J. Roger Erickson, Senior Global Real Estate Advisor at Sotheby’s International Realty, tells GN Focus. “Sales volume has increased recently even given the reduced supply of properties for sale, which shows how strong this market is. With interest rates continuing to be at record low levels, we expect the New York City market to continue to be strong in the coming months and year.”
Looking ahead: Current laws continue to favour new development and foreign investmentin New York City, Erickson says. “There are no foreseeable laws that will adversely affect prices. Many exciting new residential developments will be announced in the fall of this year and we expect a substantial amount of new inventory in the condo, co-operative and townhouse markets. As just one example, we will be listing a prewar apartment with over 5,000 square feet in 510 Park Avenue at 60th Street in the coming weeks. The price will be $12.8 million in coming weeks.”
With Chinese markets in turmoil, a wave of money could come in from investors seeking a safe haven.
TURKEY
State of the market: The 2012 reciprocity law allowing foreigners to buy property in Turkey has had a positive impact on prices, with rising demand from the Gulf.
In the first six months of this year, over 8,000 properties were sold to foreigners in Turkey, according to offical (TUIK)data. This was a 19 per cent increase over the same period in 2014. “Some 2,611 of these properties were sold in Istanbul, whilst 2,252 were sold in Antalya and 551 in Bursa,” says Monica Anca, Director of Universal21, an Istanbul-based agency that works with the GCC Middle Eastern market.
In Turkey, total home sales also increased by 19.4 per cent to 108,000 units in May 2015, versus the same month of the previous year, while mortgaged home sales rose by 34.7%, having a 37.2% share of all property sales over the same period. “The market is certainly looking healthy with property prices having shown steady increases during 2014 and the first half of 2015,” Anca says. “Not only this but Turkey recorded the highest house price growth of all G20 member countries between the second quarter of 2013 and the second quarter of 2014, 14 per cent, according to a Knight Frank indexby international property consultants Knight Frank, indicative of excellent potential in the market.”
Arab appeal: “As Turkey becomes more popular throughout Arab nations as a tourist destination, prospective investors will be able to see the undeniable potential [its] property market has to offer,” Anca adds. Arab clients now comprise 25 per cent of her company’s sales, or about one in five clients, as compared to one in 20 last year.
Looking ahead: The country is the world’s 16th-largest economy and aims to be in the top 10 by 2023, with investors attracted by its young population and large contracting sector. “Foreign direct investment from real estate investment funds is expected to accelerate in 2015-16 and onwards,” Anca says, citing the strength of the Turkish real estate sector.
SWITZERLAND
State of the market: Property prices in the Alpine country have soared as the economy shrinks, according to data from the investment bank Swiss bank UBS. House prices have climbed 2 per cent since January, when the franc-euro exchange rate peg was scrapped. “While lower rents push down returns on real estate, the overheating market for investment properties has spilled over into the home market, given the scarcity of investment and the negative interest rate environment,” UBS said on its Swiss Real Estate Bubble Index. The index rose to 1.37 points in the second quarter, up from 1.31 in the first three months of 2015 and its highest level since the first quarter of 1991, Reuters reported. Readings between zero and 1.00 are categorised as a boom, while anything higher is seen as a risk. Readings above 2.00 are categorised as a bubble.
“The market has seen difficult trading conditions over the past two years as a hangover from the global economic slowdown,” Alexander Koch de Gooreynd, Partner — Sales for Switzerland at Knight Frank, tells GN Focus. “This situation was not helped by the threat of tax changes aimed at foreign families relocating to the country, building restrictions in holiday locations plus a strengthening of the Swiss franc.” Confidence has started to return in the key regions with trading figures in 2015 far outstripping the previous two years’ results, he adds, thanks to recent votes to retain the lump sum form of taxation and maintain a status quo on inheritance taxes.
Looking ahead: No major law changes are on the horizon, but the holiday home market in the most sought-after lakeside villages continues to be restricted by the Lex Weber Law, which restricts the number of second homes in Swiss municipalities. This could send prices rising in the medium term, De Gooreynd says.
Overall, the Swiss market looks to be stabilising with adjusted pricing and a strong currency. “Tax changes around the world will tempt the high-net-worth community to consider relocation to this region,” he adds. “[Not only for] favourable tax conditions but also for the education, health care, quality of life and security conditions on offer.”
PARIS
State of the market: Home sales in France are upas investors return to the real estate market, the Housing Ministry said last month. New sales jumped 22 per cent in the second quarter, the highest since late 2009, when the economy was shaking off the effects of the post-crisis recession. Contributing factors include the scaling back of nationwide rent control plans as well as eased taxes. But the recovery has yet to end a homebuilding slump that is weighing on GDP growthin the euro zone’s second-biggest economy, Reuters reported.
Investor appeal: For foreigners, Europe’s appeal comes as sterling and US dollar reached seven- and 11-year highs against the euro, says Nicholas Leach, Partner at estate agent Athena Advisors. “This marked the official U-turn by foreign investors looking to acquire real estate in central Paris as they capitalised on unprecedented market conditions. If you combine the softer prices with currency swings for those buying in dollars, or one of the many dollar-pegged currencies, savings of up to 40 per cent can be made on historic properties in some of Paris’ most sought-after arrondissements.” Since May 2014 the price of a €5-million (about Dh21 million) property has reduced by $1.19 million from $7 million to $5.8 million on currency movements alone.
Two trends are visible in Paris, Leach says. Prices for prime period resale properties have dropped by up to 20 per cent after a 75 per cent top income tax was introduced in 2013, while demand for premium new properties remains high due to extremely limited supply.
Looking ahead: The buying spree in Francewill continue throughout the rest of this year as record numbers of Americans, British, Middle Eastern and dollar-earning expats exploit the value in currencies and softening prices, Leach forecasts. “Viewings of prime properties are up 32 per cent on last year,” he says. He expects cash buyers to remain the dominant force for the next six months as banks struggle to deal with the volume of mortgage applications.
While Paris is pushing to improve its infrastructure, with €12 billion earmarked for the extension of suburban train lines, the national election in 2017 may ring in new taxation changes for international investors, Leach says.
