Luxury House Prices Cooling Around The World

Lisa Smith, BA (Hons), CeFA

Luxury home prices in many of the world’s major cities have cooled in recent weeks as governments tightened their tax nets to slow down rises.

Expat and offshore investors are blamed for super heating home values in many countries as they have the cash to outbid local buyers.

Average luxury homes increased in value by 3.8% in the year to the end of September, according to international property consultants Knight Frank.

However, prices 18 of the 37 cities monitored for the firm’s Prime Global Cities Index experienced slower growth than in earlier quarters.

Five of the most popular world cities all experienced a price slowdown – including top ranking Vancouver, Toronto, London, Sydney and Melbourne.

Taxes start to bite

Property investors in Canada, Britain and Australia have all had tax increases imposed in a bid to discourage investors.

Vancouver, on the west coast of Canada, has seen price rises slip from a quarterly average of 8.1% since June 2015 slip to just 1.5% in Q3 2016 following a new 15% purchase tax for offshore investors.

The local government is also threatening an extra tax to come on vacant property, says Knght Frank.

Brexit jitters have seen the change in prestige home prices in London fall by 2.1% in Q3. The Brexit vote was in June, a few weeks into the quarter.

Chinese cities continued to post phenomenal house price increases – with Shanghai (23.4%), Guangzhou (14.3%) and Beijing (7.1%) all taking top 10 places in the rankings. However, the government has already recently announced cooling measures that are expected to pull back values in the coming weeks.

Price rises level out

“Elections and referendums tend to provoke a ‘wait-and-see’ approach in the minds of buyers and this has been the case both in terms of the Brexit vote and the forthcoming US presidential election,” said Kate Everett-Allen, who put together the research.

Since the start of 2012, the index has shifted from cities showing significant price rises and drops to more posting slight increase and decreases.

House increased the fastest in these cities for the year ending September 30, 2016:

  • Vancouver (Canada) – 6%
  • Shanghai (China) – 23.4%
  • Seoul (South Korea) – 17.5%
  • Guangzhou (China) – 14.3%
  • Toronto (Canada) – 12.0%
  • Melbourne (Australia) – 10.2%
  • Tokyo (Japan) – 9.2%
  • Cape Town (South Africa) – 8.5%
  • Sydney (Australia) – 8.1%
  • Beijing (China) – 7.1%

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