House prices worldwide are weakening following the effects of the credit crunch, although super prime markets are proving resilient, says the latest report from Knight Frank. Overall, prime markets are slowing globally, and emerging prime markets are proving the most at risk, with a danger of oversupply, the report says.
However super prime markets are still recording healthy growth: London, Monaco, New York, LA, the Cote d’Azur and Courchevel are all still appreciating in price, with Monaco stealing the top spot from London in Q3 for highest average price per square foot (£3,760 and £3,290 respectively). These average prices, the report also points out, fail to indicate some of the figures achieved in these cities with the £5,000, £6,000 and £7,000 psf barriers being surpassed by new build and refurbished properties.
Liam Bailey, head of residential research at Knight Frank explained: ‘Despite the credit crunch, extraordinary wealth creation has continued until recently across the global oil and commodity sectors; the financial markets have taken a significant turn for the worse and will drag down the performance of the prime markets over the next 12 months. Recent falls in energy and commodity prices also point towards a weakening in wealth generation from these sectors in future months.’
However, the super prime market should remain robust: ‘Fundamental economic arguments point to continued support for this sector,’ Mr Bailey said. ‘Demand is not going to evaporate, wealth creation and accumulation in emerging economies and in specific high end service sector activities will continue. The flight to quality in terms of both location and product we have seen over recent years will remain a constant.’
The report also adds that wealthy Russian buyers continue to influence pricing in London and the French and Italian Alps, while their counterparts from India are increasingly influential in Europe and the US, whereas wealthy Chinese buyers remain focused on Asian markets.