By Kate Everett-Allen.
A breakdown of the PIRI 100 by world region shows that Australasia (+11.4%), Asia (+5.1%) and North America (+4.5%) are the key engines of growth. Europe and the Caribbean sit firmly “mid table”, recording moderate shifts of 0.5% and -0.3% respectively. Latin America (-2.7%), the Middle East (-3.3%), Africa (-3.4%) and Russia/CIS (-5.5%) all recorded negative growth due to a combination of weak currencies, slowing economies, rising inflation, low oil prices and growing political risk.
Wealth creation and resulting cross-border flows have continued to shape prime property markets in 2016, with security concerns, currency movements, education and even healthcare also emerging as influential market drivers.
However, this year’s PIRI results highlight two key points. First, local economic activity has a strong bearing on price performance (all of this year’s top 10 rankings report 3% or more in annual GDP growth). And second, economic growth is firmly concentrated in the world’s cities (22 of the top 25 PIRI rankings are occupied by cities).
A breakdown of the PIRI results by property type also confirms this latter point. Based on results from 2016, the value of a city-based luxury home increased by 2.4% on average, a ski home by comparison saw 1.9% growth, and a beach or coastal property slipped marginally by 0.5%.
The long-held “safe haven” narrative still has its place, but with strong capital growth eluding the world’s top financial capitals, we expect secondary markets across Europe and the US to come under the spotlight.
Cities that offer the potential for attractive margins, where prices are rising from a low base and where any risk is tempered by a level of transparency and good governance (Paris, Berlin, Madrid, Dublin, Chicago and Seattle) look likely to perform well.