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Construction : General1213 | December 2011 | Source : Construction Update

Prime Global Forecast - Knight Frank

Key Headlines:
  • After two years of growth the world's prime markets look set to cool in 2012
  • Our forecast for 2012 is evenly split with 44% of the cities monitored forecast to see price falls, 44% likely to experience price rises and 12% expected to remain unchanged
  • Given the global economic turmoil it might seem surprising we are forecasting prices rises in 44% of the cities monitored. In many of these cities the critical factor is a lack of quality new supply. We expect this to be particularly evident in London, Paris, Moscow, Nairobi and Kuala Lumpur.
  • In those cities forecast to see price growth this will be underpinned by the flow of capital from the world's troubled regions and a desire amongst the wealthy to target property and other real assets over financial products
  • Over 60% of the Asian cities monitored are forecast to see price falls in 2012 as government measures aimed at dampening speculative demand start to take effect
  • The Eurozone crisis is considered a high risk for 60% of the cities covered. Political and security issues present the greatest risk to the housing markets in the Middle East and Africa.
Interest rates, high inflation and consumer debt represent the smallest risk to the world's luxury housing markets reflecting the affluent, more equity-rich buyer profile for this.

Liam Bailey, head of research at Knight Frank commented: "There are three key themes which will determine the performance of prime city markets in the short- to medium-term; the scale of global wealth generation, the ongoing search for 'safe-haven' investments and the growing divide between the prime markets in the West and the rest of the world.

Commenting on the slowdown in prime markets

Kate Everett-Allen, International Residential Research said, "The slowdown in luxury price performance is most evident in Asia. Here, the flood of cheap money brought about by a surge in domestic wealth and stimulus measures in the US and Europe was followed by a wave of monetary tightening measures to squeeze inflation. As a result the annual price growth of luxury homes in Hong Kong, Singapore and Shanghai now stands at 7.8%,-6.8% and 3.8% respectively, down from 19.7%, 15.8% and 29.7% a year earlier"
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