Prime prices in Miami, in the US, are set to rise by 10% in 2022, according to Knight Frank’s Prime Global Forecast, paving the way for ‘best-performing city’ in 2022.
Florida’s low tax regime, Miami’s competitive prices and the appeal of coastal living during the pandemic, has boosted demand. Since the start of Covid-19, Palm Beach County alone has seen 35 sales above $30 million, 20 above $40 million, and two above $100 million,
Sydney in Australia occupies second place in Knight Frank’s forecast with prime prices anticipated to rise by 9% next year. The reopening of borders, the return of investors, and the growing appetite among domestic buyers for second homes, heightened by recent lockdowns and travel bans, will see prime prices accelerate.
Record low inventory levels and strong demand for large family homes, set against a backdrop of low mortgage rates will lead to growth in Los Angeles of around 8% in 2022, placing it in second place with Auckland (7%) and London (7%) completing the top five markets.
For Auckland, 7% represents a marked slowdown in price growth as its government takes steps to rein in speculative activity. For London, it will represent the city’s strongest rate of growth for eight years. An end to lockdowns, a reopening of travel, the winding up of the stamp duty holiday and the absence of political turmoil over Brexit, will see a normalisation of market conditions.
In addition, sizeable discounts of 20% – 30% exist for Euro and US-denominated buyers taking price and currency shifts into account since the EU Referendum in June 2016.
Prime price growth in Hong Kong is expected to moderate from 8% in 2021 to 5% in 2022. The economic slowdown on the Chinese mainland, along with a slump in Hang Seng, are constraining factors but luxury prices remain at an all-time high and an influx of purchasing power from the Chinese mainland is expected once the border reopens.
In contrast to Hong Kong, Singapore is expected to see prime price growth strengthen year-on-year, reaching 5% in 2022. The limited inventory of large luxury homes in the Core Central Region, coupled with the release of pent-up demand once travel measures ease, will see sales activity and prices accelerate.
“Since the start of the pandemic we’ve monitored the performance of cities closely and the story is an evolving one. The narrative has pivoted from “cities are dead” to “smaller, secondary cities are king” and now “metropolises are back”. Behemoths like New York and London look to be awakening from their slumber with the pace of prime sales quickening and annual prime price growth moving into positive territory for the first time in three and six years respectively“, commented Kate Everett-Allen, head of international residential research at Knight Frank.
Key drivers of price growth in 2022
- Normalisation of travel will influence all high-net-worth individual (HNWI) buyer groups: owner occupiers, investors and second home purchasers.
- Interest rates rises will be less influential at the prime end of the market where cash purchasers still dominate in several cities.
- Inventory levels are at record lows in some prime markets and new construction has been delayed due to the pandemic and blocked supply chains – Sydney, Los Angeles and Singapore are particularly affected.
- Amassed savings in developed nations are not yet depleted and wealth has appreciated due to the rise in the value of assets, both real estate and equities.
- Second homes in liquid and transparent markets are in demand as HNWIs look to make up for lost time with family and friends.
Trends to watch
- The Chinese mainland’s slowdown: The Chinese leadership look steadfast in their goal to control developer financing and restrict credit growth in its push towards ‘common prosperity’. Evergrande’s collapse is unlikely to kick-start widespread contagion but the direction of policy suggests more muted price growth in the medium term.
- Stepping away from stimulus: With some central banks taking cautionary steps away from ultra-accommodative monetary policy, asset prices will no longer be artificially inflated.
- Higher taxes: Singapore is considering a wealth tax, President Biden has proposed increasing the top rate of tax for highest earners, the UK is reviewing its capital gains taxes and Spain plans to introduce a rent cap for landlords with multiple properties.
- Red tape: Property cooling measures, non-resident restrictions and tighter regulation of holiday rental platforms such as Airbnb are high on the agendas of city authorities.
- Rental recovery: Top tier cities are seeing rents and demand accelerate as CBDs reopen. Buy-to-let and institutional investment will increase where the numbers stack up.
- Greenback to strengthen: The US dollar is forecast to maintain its current strength* (USD/EUR 1.15, USD/GBP 1.34) in 2022 as global economic uncertainty rises and the Federal Reserve looks to tighten monetary policy.