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Covid-19 takes toll on prime residential property markets around the world as sales volumes tumble

20 cities have analysed the direction that residential prices will take

Prime Global Residential Forecast, Knight Frank, Lisbon, Monaco, Vienna, Shanghai, Global prime residential markets, Impact of Covid-19, Luxury residential property, Bengaluru, Mumbai, Delhi, Unsold inventory pressure, Paris, Miami, Berlin, Geneva, Sydney, Singapore, Liam Bailey, Shishir Baijal, South Korea, Vietnam, New Zealand, Australia

According to latest research - Prime Global Residential Forecast by Knight Frank - Lisbon, Monaco, Vienna and Shanghai are the only four global prime residential markets set to see price growth throughout the remainder of 2020 as the impact of Covid-19 takes its toll on luxury residential property markets around the world. Prime residential market of Mumbai is expected to see a price fall of 5% in the year 2020. For the year 2021, Mumbai’s prime residential market is expected to witness a price decline of 3%.

Analysis by Knight Frank of 20 cities globally highlights the direction of travel for prime residential prices in 2020 and 2021 based on projections for demand and supply, the impact of Covid-19 in the different markets and the varying government stimulus measures announced. The scale of global economic uncertainty is unprecedented and therefore putting an exact figure on forecasts is challenging. As a result, Knight Frank has placed the 20 cities analysed into four price bands including markets that will see: strong price growth (+5% or more), low price growth (0% to 5%), flat or low price falls (0% to -5%) and strong price falls (-5% or more).

Besides the forecast, Knight Frank, through its Prime Global Cities Index Q1 2020 has also shared a 12-month and 3-month price change for the prime residential markets. Below are the key observations for Prime India markets:

*Bengaluru’s prime residential market performed better than Mumbai and Delhi. Globally, the city ranks 27th with 1.4% annual price change for the period Q1 2019 – Q1 2020; also witnessing 0.1% price change in Q1 2020 compared to the previous quarter.
*Delhi ranks 32nd with 0.4% annual price change for the period Q1 2019 – Q1 2020. The city saw a flat 0.0%price change in Q1 2020 compared to the previous quarter.
*Mumbai ranks 33rd with 0.1% annual change for the period Q1 2019 – Q1 2020. The city registered a price decline of -0.1% in Q1 2020 compared to the previous quarter.
*Unsold inventory pressure coupled with tough economic environment, reflected in a 6-year low GDP growth rate in Q3 FY20, and had strained prime residential market across key cities. The COVID-19 pandemic which started to reflect on market activities from mid-March this year has further aggravated the concerns of this segment. Although we do not think that the full impact of COVID-19 is captured in Q1 2020 numbers.

At the start of the year, Knight Frank had predicted that a number of markets around the world to see healthy prime price growth. Paris led Knight Frank’s Prime Global Forecast for 2020 with expected growth of 7%, Miami and Berlin were set to see rises of 5% and prime price growth was anticipated in Geneva and Sydney at 4% respectively.

Liam Bailey, global head of research at Knight Frank said; “There were positive signs in several markets globally that prime prices would rise throughout 2020 but unsurprisingly, Covid-19 has put a halt to that. Of the 20 cities Knight Frank has analysed, 16 of these will see prime price declines in 2020, with only a handful avoiding a fall into negative territory – either because of historic supply shortages or because transactions were able to continue during lockdown and these measures are already being eased.”

Of the cities set to see a decline in prime prices, those likely to be hit the hardest are either emerging markets or cities that were already seeing weak price growth at the end of 2019. Singapore is one exception for which Knight Frank predicted prime prices would rise by 3% throughout 2020 but the fall-out of Covid-19 and the length of time the Singapore market has been affected, changes the prediction to a decline of up to 5%.

Shishir Baijal, CMD, Knight Frank India, said, “The impact of COVID- 19 is far reaching for most global markets which is reflected in the outlook for the prime residential segments. India’s key markets will also be faced with the uncertainty mostly due to a significant erosion of confidence amongst buyers across spectrum. However, this also presents with a ray of hope for serious buyers with adequate liquidity to enter the real estate segment in India and across the world as values would be attractive.”

Outlook

As we look ahead to the next few weeks and months, we expect to see:
*Markets starting to exit lockdown restrictions (China, South Korea, Vietnam, New Zealand, Australia)
*Sales volumes to rebound but still below long-term average
*Economic fallout to weigh on markets
*Stimulus measures and accommodative monetary policy to assist
*Cooling measures could be eased in many markets

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