Luxury residential prices in key global cities weakened in the third quarter of the year with a slower summer season and political and economic events having an impact.
The latest prime global cities index from Knight Frank rose by only 0.2% in the third quarter of 2014, its weakest performance for two years.
Prime residential prices rose by 4% over a 12 month period, down from 6.6% a year earlier
Tokyo recorded the strongest quarterly growth whilst Jakarta saw the strongest annual rise in luxury prices.
Luxury homes in North American cities increased by 10.5% on average in annual terms, a stark contrast to Europe. Indeed the index shows that European cities by comparison averaged a 1% rise.
The prime index stands 36.3% above its low in the second quarter of 2009, whilst the mainstream global index rose by only 14.3% over the same period.
The index report says that the moderate level of price growth is partly attributable to the fact that the third quarter, for much of the world, is dominated by the summer holiday season which often sees slower sales activity reducing the pressure on prices.
Key events on the political and economic stage are also likely to have been contributory factors, it adds, citing the prospect of tightening monetary policy in the US, the approaching general election in the UK including on-going discussions of a mansion tax, the persistence of cooling measures in key Asian cities and perhaps most pivotal, a new set of negative economic indicators emanating from Europe.
Although Jakarta tops the rankings, with prices rising 27% in the year to June, the latest available data, the city has seen a sharp deceleration in prices, rising by only 2.5% in the first half of 2014.
In Dubai, the rate of luxury price growth has declined. The report says that this in part due to temporary factors such as Ramadan which led to weaker buyer activity but also due to the UAE Central Bank’s mortgage cap which is stricter for those purchasing properties above AED5 million.
Analysing the data on a quarterly basis, Tokyo and Cape Town were the strongest performers with prices ending the three month period 9.2% and 6.3% higher respectively.
In terms of the US cities, all four included in the index are positioned in the top 10 rankings for annual price growth. The disparity with Europe’s cities is stark. Luxury prices rose by 10.5% on average across North American cities over a 12 month period compared with an average of only 1% across European cities.
This quarter marks the inclusion of Seoul for the first time in the index. Since reaching their low in 2013, luxury residential prices in the South Korean capital are continuing their recovery, rising by 4.1% in the year to September.