In this blog post, we delve into the key insights from the latest Knight Frank's Prime Global Cities Index Q1 2023 report. This comprehensive report provides an in-depth analysis of the world's luxury housing markets, tracking price changes across 46 leading prime markets.
The first quarter of 2023 marked a significant shift in the global luxury housing market, with the annual price change turning negative for the first time since the Global Financial Crisis. This change has been largely driven by higher interest rates following recent global monetary policy tightening.
Despite the overall downturn, some cities have shown resilience and even growth, with Lisbon standing out as a strong performer. The city now ranks 4th among European cities, outpacing even Madrid and Paris, indicating a positive growth trend in its luxury housing market.
Below, we present the main takeaways from the report:
- The first quarter of 2023 saw the annual price change in the world’s luxury housing markets turn negative for the first time since the Global Financial Crisis.
- The Prime Global Cities Index (PGCI), which tracks prices in 46 leading prime markets, fell by 0.4% in the 12 months to the end of March 2023. This marks a sharp reversal from a peak of 10.1% growth in the fourth quarter of 2021.
- The slowdown in growth has overwhelmingly been driven by sharply higher interest rates following recent tightening in global monetary policy.
- Annual prices are now falling in 16 of the 46 markets tracked. While two-thirds of markets are still seeing positive growth, the large size of price declines in the weakest markets has pulled the overall index negative.
- At the top of the table, Dubai’s 44% annual growth remains a substantial outlier, with second place Miami the only other city to reach double-digit growth (11%). Zurich (9.4%), Berlin (5.7%), and Singapore (5.5%) complete the top five markets.
- Lisbon ranks 9th in the index with a 12-month percentage change of 4.6%, a 6-month change of 2.2%, and a 3-month change of 0.9%. This indicates a positive growth trend for Lisbon compared to many other cities. Among European cities, Lisbon ranks 4th after Zurich, Berlin, and Edinburgh, and ahead of Madrid and Paris.
- New Zealand dominates the lower ranks of the index with Wellington seeing prices fall more than 27% over the past year, followed by Auckland (-17%), and Christchurch (-15.3%). Other weak performers include Stockholm (-11%) and Vancouver (-9.4%), reflecting weakness in their broader national markets.
- While the Federal Reserve and other central banks may be closing in on peak rates, it is likely that even prime housing markets will experience continued downward pressure on prices for the next few quarters. However, it is unlikely we will see a correction similar in scale to that seen during the Global Financial Crisis.
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