Hong Kong overtook London as the world’s top luxury real estate market in 2016, as the city-state saw continued demand from wealthy Chinese buyers despite hefty stamp duties, according to a report released Wednesday by Christie’s International Real Estate.
London, which topped the "Luxury Index" for the previous four years, dropped to second place partly due to tax hikes and Brexit-related uncertainty, according to Christie’s annual report on 100 prime property markets worldwide.
Meanwhile, Toronto replaced Auckland, New Zealand, as the hottest performing prime property market in the brokerage’s "Luxury Thermometer" rankings, which measures the pace of growth. Toronto showed sales of million-dollar-plus homes almost doubling over a year period.
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"Overall, the global luxury markets remained healthy with moderated sales growth," said Dan Conn, chief executive of Christie’s International Real Estate, noting that market shifts mainly reflect the concentration of global wealth, stability and historic performances of real estate.
Other major findings in the report include:
Overall, the global luxury real estate market trended slightly upward last year, with sales increasing 1% and prices growing 2%.
For the first time ever, the world’s top-10 reported residential property sales were all priced above $100 million, and sold for more than $1.3 billion in aggregate, with an average sales price of $131 million.
Hong Kong registered four residential sales above $100 million in 2016 and set a world record with a $270-million home sale.
Miami dropped to 10th place from seventh in 2015 in the Luxury Index, which measures the actual state of the market. The city’s luxury market was hit by a decline in sales, an influx of new development condos and a steep increase in inventory.
Canada’s Toronto and Victoria, British Columbia, claimed the top two spots in the Luxury Thermometer rankings. New additions to this year’s top 10 Luxury Thermometer list include Charleston, South Carolina; Paris, France; Austin, Texas; and San Diego, California.
Luxury sales slowed while prices edged higher
After several years of dramatic growth, the global luxury real estate market saw a subdued 2016, with sales increasing 1% year-over-year, the Christie’s report found. By comparison, sales rose 8% in 2015 and 16% in 2014 during a post-recession boom.
Although the overall luxury sales flattened out, prime markets showed sharp bifurcation in 2016. For example, Toronto saw a 90% increase in million-dollar-plus sales, while sales in London slumped 35%. Among the 100 markets surveyed, 24 markets saw a slowdown in sales, 19 reported significant increases and the majority remained stagnant.
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Across the globe, luxury properties took longer to sell, indicating increased inventories, pricing challenges and the specter of uncertainty in luxury markets. In 2016, million-dollar-plus homes took an average of 220 days to sell versus 195 days in 2015, representing a 13% increase. Properties in second-home resort markets took longer to sell than those in cities.
Prices of million-dollar-plus homes increased about 2% in 2016 from a year ago. Over half of the 100 luxury markets saw a price increase, with Toronto reporting the largest increase, at 20%.
Hong Kong had an outstanding year
Hong Kong scored highest in almost all six luxury residential metrics adopted by Christie’s, namely, record sales price, average price per square foot, the numbers of sales and listings, absorption rate, the percentage of non-local buyers and second-home owners.
Hong Kong had four residential sales above $100 million and claimed the majority of 1,500 residences publicly available for sale at $20 million and above.
| The world’s top ranking luxury property markets | |||
| Rank | Luxury Index | Luxury Thermometer | Most Expensive (per sq ft) |
| 1 | Hong Kong | Toronto | Monaco ($5,420) |
| 2 | London | Victoria, BC | Hong Kong ($4,895) |
| 3 | New York | San Francisco | London ($2,710) |
| 4 | Los Angeles | Austin, TX | Côte d’Azur ($2,500) |
| 5 | Singapore | Charleston, SC | New York ($2,000) |
| Source: Christie's International Real Estate | |||
Although the Hong Kong government implemented cooling measures in the end of 2016, the demand continued to strengthen as affluent Chinese buyers sought to hedge against a weakening yuan.
"It boiled down to the concentration of world wealth, and there is a significant concentration of billionaires in China," Mr. Conn said.
In addition, Hong Kong’s real estate has a long history of healthy financial performance and market stability, he said.
"On the risk side of the equation, Hong Kong is more stable than other prime markets," Mr. Conn pointed out. The U.S. presidential election and the U.K.’s Brexit referendum, in particular, have created a lot of uncertainty for property buyers.