Luxury home prices in leading global cities increased in the first quarter of 2017 by 4.3% compared to the same period last year, and this upturn can largely be attributed to China’s cities, which continue to dominate the top tier of the growth rankings, according to the latest Knight Frank report published Monday.
Guangzhou, the third largest city in China, had a 36.2% increase in luxury property prices over the 12 months to March and ranked No. 1 on the Knight Frank list.
The prime properties in Knight Frank’s report correspond to the top 5% of the housing market in each city.
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Compared to tier-one cities like Beijing and Shanghai, Guangzhou has a lower inventory of residential houses. Additionally, policymakers in the city were slower to introduce cooling measures, which are now widely in place across most tier one cities, Kate Everett-Allen, head of international residential research at Knight Frank, told Mansion Global.
Together, Beijing, Shanghai, and Guangzhou recorded average price growth of 26.3%.
Cities in the world’s other major economy also performed better than the last quarter. U.S.cities—led by Miami—rose in the growth rankings, while Toronto luxury house prices surged 22% higher and ranked third in the list, outpacing Vancouver which is seeing a 7.9% year-on-year growth.
Other centers of growth include Seoul (17.6%), Sydney (10.7%), Stockholm (10.7%), Berlin (8.7%) and Melbourne, Australia (8.6%).
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The Asia-Pacific region took six of the top 10 spots on the list.
"An Asian revival might be overstating it, but we are certainly seeing the region’s key cities of Hong Kong (5.3%) and Singapore (4%) rise up in the rankings following years of lackluster growth," Ms. Everett-Allen said in the report.
Prime property prices in Hong Kong and Singapore have been characterized by slow growth for some years, due in part to the cooling measures, such as buyer’s and seller’s stamp duty as well as an economic slowdown.
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In March, Singapore reduced its seller’s stamp duty to12% from 16% but the 15% foreign buyer’s stamp duty remains.
Several cities around the world are also introducing regulations in the form of foreign buyer taxes or higher stamp duties to tackle affordability concerns and limit speculative investment.
Vancouver imposed a 15% tax on foreign buyers in 2016 and had witnessed a slower growth pace since. And London’s prime property prices fell 6.4% in the past quarter due to a higher level of stamp duty, according to the report.
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Luxury house prices in China are rising from a low price point, which leads to higher increases compared to other more expensive cities in the world. But as house prices grow at a higher level and policymakers in China enforce stricter cooling policies, these price surges in Chinese cities might not last long.
"We expect the rate of growth in the Chinese cities to slow as cooling measures take effect," Ms. Everett-Allen said. "The number and type of regulations vary from city to city, but broadly speaking, buyers now need to put down larger deposits, and there are often limits on the number of properties that can be bought by individuals or families."