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Super-prime residential markets around the world outperform expectations

by • July 24, 2020 • Research and AnalysisComments (0)107

Super-prime residential markets around the world outperform expectations despite Covid-19 lockdowns

Research released today by Knight Frank confirms that despite Covid-19 inspired lockdowns around the world, 153 super-prime residential real estate transactions above US$10m have taken place globally since March 2020, with a total value of US$3.2bn.

super-prime residential

Image credit: Pixabay

However, despite the positivity that the global super-prime residential market didn’t buckle during lockdown, transaction levels to the end of H1 2020 are far below the levels seen in H1 2019 with 281 super-prime (US$10m+) transactions taking place January to June 2020 compared to 594 over the same period 2019.

The research looks at how 12 key super-prime residential markets around the world performed in H1 2020 compared to H1 2019 and delves into the number of transactions completed since March 2020 when Covid-19 was officially labelled a pandemic, lockdowns were enforced around the world and international travel ceased.

Total Transaction Volumes in Super-Prime Residential Markets

Market

H1 2019

H1 2020

March – June 2019

March – June 2020

Hong Kong

155

60

111

41

Los Angeles

77

52

58

35

New York

137

41

100

19

London

75

24

56

16

Palm Beach and Broward

29

24

24

10

Singapore

29

27

24

8

Sydney

13

15

12

6

Dubai

17

8

13

6

Miami

25

12

16

4

Orange County

24

9

21

4

Geneva

10

8

9

3

Melbourne

3

1

2

1

“The volatility of equity markets is prompting some ultra-high-net-worth-individuals to rebalance their investment portfolios in Asia-Pacific, giving greater weight to property assets. Prime residential markets stand to benefit from this shift, remaining relatively more resilient compared to other asset classes in the second half of this year,” says Victoria Garrett, Head of Residential, Knight Frank Asia Pacific.

Garrett continues, “Hong Kong, Singapore and Sydney remain safe havens for the region’s wealthiest, demonstrated by the resilient demand in the prime and ultra-prime segments”, added Garrett. “In uncertain times, the promise of long-term stability will be particularly attractive to investors. For Asia’s wealthiest, acquiring prime assets is a form of wealth preservation.”

Linda Chern, Head of Residential Project Marketing, Prime Sales & Leasing, Knight Frank Singapore, shares, “Homebuyers and investors have longed viewed Singapore favourably due to its safe environment and corporate governance. The city state is highly regarded for its quality infrastructure, digital & personal security, education standards and transparent legal systems. Additionally, the fusion of the diverse cultures in unique clusters further offer an enriching lifestyle in Singapore.

“The imposition of Singapore’s circuit breaker measures (market lockdown) on 7 April 2020 stopped activity in the local private residential market in its tracks, but only for a short stretch in April. Following on, new home sales volume picked up from the end of April, as buyers got used to the new mode of “transacting-from-home”, via virtual viewings and the like. Nevertheless, luxury residential projects in Singapore will continue to offer the ultra-wealthy the opportunity to own homes that offer a comforting mix of greenery and exclusivity, whilst enjoying the amenities and convenience of a modern city.”

Flora Harley, Global Residential Research at Knight Frank comments, “Whilst the number of transactions were down in 11 of the 12 markets analysed, two markets saw sales volumes increase and over half saw the average value of transactions increase.

“Sydney was the standout market with 15 super-prime sales in the first half of 2020 compared to 13 in the first half of 2019, however looking at the period between March and June period there were only six compared to 12 in the same period last year.”

Overall, four markets were within seven of their March to June 2019 levels of transactions, Melbourne only one below, Sydney and Geneva both six below and Dubai seven below, with a total of six sales.

Total Sales Volume in Super-prime Residential Markets

Despite the falling number of transactions, deal values were generally higher. Overall, the global average transaction value increased by 15% for the March to June period, at US$20.7m compared to US$18m for the same period in 2019.

London saw the largest increase and takes the top spot with an average transaction value of US$38m, compared to US$16.9m in 2019 – the average in Geneva also jumped, whilst Hong Kong which usually sits in first place has fallen to third position.

Market

Total Sales Volume

March – June 2019 (US$)

Total Sales Volume

March – June 2020 (US$)

Hong Kong

2,351

812

Los Angeles

1,098

693

New York

1,793

363

London

944

608

Palm Beach and Broward

333

170

Singapore

454

130

Sydney

152

101

Dubai

173

80

Miami

255

52

Orange County

309

59

However, Hong Kong ranks highest for the number of transactions and total sales volume with 60 having taken place in 2020 so far worth a combined US$1.2bn. There have been 41 since March and, whilst this is less than half of the 155 in the first half of 2019, it is only marginally down from the 74 in the second half of 2019 when the city grappled with social unrest.

New York has the third highest number of super-prime sales this year with 41, behind 52 in Los Angeles, and almost half of these, 19, having taken place since March. With the city being particularly hard hit by Covid-19, accounting for approximately one in six of all US cases in April, this demonstrates resilience and that the fundamentals remain.

Ultra-Prime Market (US$25m)

The research also takes a look at the ultra-prime market (above US$25m) in these 12 areas. It highlights that eight of these markets saw one or more transactions in the ultra-prime market over the March to June 2020 period – two saw more sales than the same period last year and two held steady – a total of US$1.3bn was transacted.

Market

Total Transactions

March – June 2019

Total Transactions

March – June 2020

Hong Kong

20

8

London

6

6

Los Angeles

12

5

New York

16

3

Palm Beach and Broward

1

2

Geneva

2

2

Sydney

0

1

Singapore

3

1

Sydney and Palm Beach went from no sales or one sale above US$25m in March to June 2019 to one and two respectively, London saw six in each period and Geneva saw two.

Hong Kong has once again seen the highest number of ultra-prime sales in this time period with eight and a total of 10 so far in 2020, down from 30 in the first half of 2019. However, in terms of total volume of sales, London leads the way with US$434m in sales followed by Hong Kong’s US$372m.

The momentum in this segment could continue as ultra-high-net-worth individuals look for more spacious options post-lockdown. This is already evident in, for example, LA where half of this year’s ultra-prime sales have taken place since the beginning of April.

*Data correct as at 22 June and corresponds to publicly available sales and therefore may not capture all sales in the market. Exchange rates as at 22 June 2020.

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