The value of the world’s leading prime residential property markets rose on average by 1.8% in 2015, according to the latest results of our unique Prime International Residential Index (PIRI). This was similar to the 2% growth seen a year earlier.
However, in 2015 over 66% of the PIRI 100 locations recorded flat or positive price growth, compared with 62% in 2014. The gap between the strongest and weakest-performing luxury residential markets in the PIRI 100 has shrunk considerably from 97 percentage points during the tumultuous times of 2009, to 45 points in 2015. Despite this convergence, the index still saw some significant outperformance last year.
Vancouver leads the rankings by some margin, with prices accelerating 25% during 2015. A lack of supply, coupled with foreign demand, spurred on by a weaker Canadian dollar explain the city’s stellar performance. Antipodean markets also performed strongly. Sydney, Melbourne and Auckland all recorded double-digit annual price growth, up 15%, 12% and 10%, respectively.
Of the 34 locations where prime prices slipped in 2015, 22 were located in Europe. Yet there is renewed optimism that prices in the region’s most popular second-home destinations, particularly Spain, Italy, the Algarve and parts of the Côte d’Azur, are close to bottoming out. Munich, Amsterdam, Monaco and Berlin are Europe’s standout performers, recording price growth of 12%, 10%, 10% and 9% respectively in 2015. Even the global financial crisis hardly affected the upward trajectory of key German cities.
Amsterdam conversely is bouncing back from a fall of 18% in peak-to-trough terms. The prime central London market remained in positive territory during the year (+1%) despite a raft of new property taxes, many of which were aimed at foreign buyers, being introduced. The relaxation of cooling measures in some Chinese cities has had an immediate impact on performance, with luxury prices in Shanghai ending 2015 14% higher.
Given price falls in Singapore and Hong Kong, it will be interesting to see if policymakers in these markets follow suit and loosen their grip on cooling measures. Despite areas of growth, the world’s emerging markets are not the shining beacons they were two to three years ago. The US Federal Reserve’s recent rate rise, the resulting strong dollar and the collapse in commodity prices all help to explain why Buenos Aires (-8%) and Lagos (-20%) are located at the foot of the PIRI 100.