As China’s economic growth slowdown continues, it’s set to have a ripple effect across luxury real estate markets in top cities across the world, according to a new report.
Knight Frank’s new “Prime Cities Forecast Report” for luxury real estate in 2016 projects that price growth will slow from 3 percent in 2015 to 1.7 percent in 2016 worldwide, with China’s economic slowdown listed as one of the main factors in the decline.
The firm lists a lower-than-expected growth rate in China as its number one “risk factor” for the global luxury real estate market in 2016. “A hard landing for China’s economy would lead to a slump in global commodity prices,” says the report. “A prolonged slowdown in growth would mean those emerging markets that have benefited from the Chinese-driven boom in commodity prices (large parts of Latin America, the Middle East, and Africa) would see a knock-on impact. A prolonged deceleration in growth would have significant repercussions across the EU and the United States as lower demand for goods starts to impact and exports fall.”
The cities with luxury real estate markets most vulnerable to the China slowdown are Shanghai and Sydney. As Chinese luxury real estate buyers fan the globe, Singapore, Hong Kong, Paris, New York, and London are also considered at a “high” risk level in relation to China’s economy.
Thanks to China’s slowdown, luxury property price growth in Shanghai is expected to decline from 10 percent in 2015 to 4 percent in 2016, says the report. While supply will remain constant, the firm projects that demand and volume will see slight increases in the coming year.
Meanwhile, Hong Kong, which is stuck in a retail sales slump, will move from the black to the red this year as the world’s worst-performing market for luxury real estate. After lackluster 1.5 percent growth in 2015 (despite the fact that a $66 million apartment set the record for the most expensive sale in Asia in November), Knight Frank projects that Hong Kong luxury real estate prices will decline by 5 percent in 2016. Supply, demand, and volume are all expected to see slight increases.
Sydney, a major hotspot for Chinese luxury real estate buyers, is expected to see the world’s strongest growth this year with 10 percent growth in 2016 as supply, demand, and volume increase moderately. Although this rate is slower than last year’s 15 percent, Sydney fares far better than Singapore, which is expected to see a decrease of 3.3 percent.