From Hong Kong to New York, the price of high-end homes is set to fall
Hong Kong is one of at least 12 major cities that are expected to see a drop in the value of residential properties this year.
Bloomberg has seen a report that predicts that more than half of 30 cities tracked by Savills in the world will see a slower growth in residential capital in 2024. The real estate firm predicts that the growth of the value of high-end houses will slow down to 0.6% this year, from 2.2% in 2023. This is the lowest increase since 2019.
Hong Kong’s high interest rates and political unrest are stoking the sales of prime real estate while putting buyers off. This combination will likely cause prices to drop by more than 10% this year, making it the most soft market tracked by Savills.
Although prime residential property is less resilient to mortgages than mainstream residential, weaker macroeconomic circumstances will dampen sentiment. Many buyers and sellers are waiting to see what happens.
The markets around the world are trapped between sharply increased borrowing costs, which will likely remain high for a long time to come, and a lack of housing that keeps prices high.
After a surge in post-pandemic demand, 2023 saw a muted growth for prime residential markets.
New York and San Francisco are also weak, with the first experiencing a tepid return to the office and the second still enduring tech turmoil.
Chinese cities such as Shenzhen and Guangzhou, along with Hangzhou, are also expected to decline in value due to the government’s efforts to stabilize the volatile property market.
Savills reports that global prime rental values increased by 5.1 percent in 2023, outpacing capital values of almost all cities monitored. This is partly due to the demand from buyers who delayed purchases until interest rates stabilized.
Rents in Lisbon grew by 22 percent on average between July and December last year as the demand for rental space outpaced the supply following the introduction of rent control.
Even so, the prospect of homebuyers in 2020 is improved by the easing of inflationary pressures. Savills says that the possibility of central banks cutting interest rates in 2019 could have a positive impact on pricing for the second half of the year.
Sydney and Dubai, both of which are benefiting from the increase in high-net worth population, will see their prices rise by 9.9% and 5.9% respectively. Amsterdam and Tokyo also predicted growth, which helped keep the average capital forecast in the positive range across all 30 cities.
Savills says that a wave election due to occur in nearly 70 countries by 2024 may restrict the value of major cities in other areas.
Elections are coming up in the next year, which will add an extra layer of uncertainty. We expect a lower but still positive level of capital growth in 2024.