AsiaLIFE

Distributed by Knight Frank and Citi Private Bank, the Wealth Report came out in March this year. It made for some intriguing reading – especially if you are interested in the property and the luxury homes markets. According to the Knight Frank Prime International Residential Index – or PIRI for short – almost 50 percent of the locations featured in the report were able to achieve positive price growth in 2008. In 26 of the 55 nations, the price of property increased last year. However, in the final quarter of last year it was a very different story. The price of property in three quarters of the countries featured in the report either decreased or stalled in the last three months of last year.

Of the locations featured, Bangkok came out tops with the price of residential property increasing by 22.5 percent in 2008. Reflecting the global trend, in the last quarter of the year, the price of residential property in Bangkok rose by just 3.4 percent. Other Asian locations fared well. In Jakarta, property prices increased by 17.7 percent in 2008, and by just 3 percent in the last quarter of last year. Similarly Bali property prices were up by 16.7 percent on the year and by 3.7 percent at the end of last year. While residential properties in emerging markets appeared to hold their own, those in the established financial centres definitely did not. Hong Kong was the worst performing location experiencing falls of 24.5 percent on the year. London was another big loser. It came in at 53 in the list of 55 locations. Property prices in the U.K. capital fell by 16.9 percent, according to the report, while properties in the neighbouring Home Counties fared even worse – falling by a massive 19.4 percent.

The report also questioned whether the current downturn is leading to a ‘re-pricing’ of properties around the world or if “something more fundamental had occurred that will mean prime market pricing will be further suppressed and take a long time to recover.” Its conclusion – using London as an example – is that re-pricing and recovery is likely to occur. The justification for this conclusion is that London’s top-end market has begun to move once again after stalling in 2008. The report states that wealthy international buyers are being lured back to the London real estate market because of a 30 percent reduction in the price of property as well as a 20 percent fall in the pound. This has resulted in discounts of up to 50 percent, something which wealthy international buyers are finding hard to resist.

Knight Frank’s head of residential research Liam Bailey says that sales activity is starting to pick up. “The number of properties in the central London markets which exchanged rose by 26 percent on a year-on-year basis, and 13 percent on a month-on-month basis. Both February and March recorded more sales activity than the same period a year ago,” Bailey says. But have property prices really bottomed out, and has the market really started to move. The answer depends on who you ask. We have heard from those plugging the top end of the market, but what’s happening mid-market. In the U.K. one building society, the Nationwide, recently came out with some positive news. Earlier this month it announced that property prices in the U.K. rose by 0.9 percent in March, and that house purchase activity had reached its highest level since May 2008. The building society did temper its comments by saying that it was still too early to talk of a recovery.

The Nationwide’s positive news was countered by another of the U.K.’s major lenders – the Halifax. It reported that prices had declined by 1.9 percent in March. House prices in the first quarter of 2009 were 2.7 percent lower than those in the last quarter of 2008. “Conditions are likely to be tough during the remainder of 2009 despite the improvements in affordability,” it added.

In conclusion it would appear that luxury homes are starting to move (if they indeed ever stopped) while the demand for ‘family’ homes and apartments is still unclear. With such conflicting reports around at the moment, if you are looking to add property to your portfolio it might be best to wait until things are slightly clearer. Towards the end of the year might be the time to start looking and investigating. Happy house hunting!