Chinese cities lead global prime real estate recovery

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CHINESE cities have dominated prime residential property growth in the first six months of 2021, while values across the world grew at the fastest rate since the end of 2016.

Across the 30 cities in Savills’ World Cities Index, capital values grew by an average of 3.9% in the period.

Sustained record-low-interest rates, improved buyer confidence, increased transactions at higher price points, and economic stimulus measures all contributed to the result. It follows a subdued period that ran from the middle of 2018 to December 2020 in which prices only grew at an average of 0.7%, as a result of global uncertainty and tax and policy changes in many cities.

The low growth was exacerbated by the pandemic in 2020, which had the additional effect of lockdowns shuttering property market. While over 70% of the locations had positive capital value growth for the first half of the year, those that posted negative capital value growth – New York, Mumbai, Paris and Barcelona are all historically reliant on international buyers in their prime markets.

“The return of international travel is likely to provide an increased supply of buyers for prime properties,” Kelcie Sellers, analyst, Savills world research, said,

“Sustained economic recovery globally is forecast to further support buyer confidence and boost demand. Though a degree of pandemic-related uncertainty remains, the prime residential sector is likely to remain strong through the rest of the year.”

China’s Shanghai led all comers with 13.7% growth over the first half, followed by Hangzhou (13.2%), while Shenzhen was equal-fourth (9.1%) and Guangzhou next (7.9%).

Price rises in China have accelerated so far in 2021 despite financing and local policy tightening in an attempt to cool the markets. Lending-fuelled purchases have been driving Chinese property price growth in recent years as buyers believe property is likely to remain the safest investment in China.

Los Angeles and Miami led growth in the United States, coming in a third and fourth with 12.0% and 9.1% increases respectively. Miami seen a jump in domestic migration as a result of increased remote working, favourable local taxes, an influx of tech and finance companies, and the enhanced buying power from low-interest rates.

Markets recording negative growth, such as Paris and Mumbai, have been impacted by lower transaction volumes. New York has seen prices decline over four years because of oversupplied markets, but signs point to prices stabilising this year as transactions increase, according to Savills.

Cities that saw price changes go from negative to positive territory in the first half of 2021 include Singapore, Bangkok and Kuala Lumpur, and the work-from-home boom and resulting increased need for space helped to push up capital values in Dubai, Cape Town, Moscow and Lisbon.