Prime property in London, Lisbon, Monaco and Shanghai set to grow amid coronavirus pandemic
Prime property is set to grow in 2020, but only in four cities and three of them are in Europe. The Knight Frank Global Residential Forecast 2020 released in May predicts that: “Lisbon, Monaco, Vienna and Shanghai are the only four major prime residential markets set to see price growth throughout the remainder of 2020 as the impact of COVID-19 takes its toll on luxury residential property markets around the world.”
While this forecast may seem gloomy for many there is optimism among the experts when looking beyond 2020. Kate Everett-Allen, Partner and Head of International Residential Research at the global property firm, highlights the growth in prime European locations in the coming years. She explains: “Looking ahead to 2021, we are likely to see a slight rebound in most markets. London and Lisbon sit out in front in 2021, with forecast growth above 5 per cent. A number of other European markets such as Berlin and Madrid are also expected to rebound well.”
Underlying reasons behind rebounds in certain cities and not others seems to be down to differences in regional prime property markets coupled with national efforts to curtail COVID-19. Commenting on Lisbon and London, Ms Everett-Allen says: “In Lisbon, Portugal’s handling of the crisis combined with strengthening demand and limited prime supply will underpin price growth. [Portugal’s] ‘Golden Visa’ has gone down particularly well with Chinese, Brazilian and Turkish buyers. In London’s case, the political certainty provided by last December’s general election boosted housing market confidence during January and February. With prices in some areas down as much as 25 per cent over the last five years, we expect a sharp uptick in 2021.”
Monaco provides strong support for realtors during pandemic
Turning attention to Monaco, the Principality’s Economic Board has been proactively reaching out to prime real estate vendors in a bid to shore up the market and boost recovery efforts. Caroline Olds, Managing Director of Monaco’s Caroline Olds Real Estate firm, praises the Principality’s support. Speaking with the Monaco Tribune in May, she explains that: “The Principality has been incredibly supportive from day one. The Monaco Economic Board reached out to us and the government [reached out] through our accountant and the Chambre Immobilière. I’ve been very impressed with the support offered and the speed of their response. My business doesn’t rely on day-to-day transactions and — hopefully — we will make up the business lost later this year. Given our low-cost base, I’m lucky.”
Positive over the market recovery later in the year, Ms Olds says: “I’m confident that the market will recover very quickly from the shutdown in Monaco and around the world. We have learnt so many lessons and — of course — we must never forget the loss of so many loved ones. Fortunately, the property business in Monaco is resilient. I expect we will finish the year successfully.”
Pre-pandemic a strong indicator of post-COVID-19 prime market recovery
The unprecedented nature of COVID-19 makes exact forecasts near impossible. Liam Bailey, Global Head of Research at Knight Frank, explains the situation in the 20 prime cities analysed. He comments that: “There were positive signs in several markets globally that prime prices would rise throughout 2020 but — unsurprisingly — COVID-19 has put a halt to that. Of the 20 cities Knight Frank has analysed, 16 of these will see prime price declines in 2020, with only a handful avoiding a fall into negative territory — either because of historic supply shortages or because transactions were able to continue during lockdown and these measures are already being eased.”
The property firm predicts the sharpest declines will be in emerging markets that were suffering from poor price-growth before the COVID-19 pandemic. Singapore is the notable exception, where prices were set to increase by three per cent this year but predictions have since been downgraded to a decline of up to five per cent.
HNWs to drive prime property trends post-lockdown
Recovery in the prime markets will be largely influenced by the behaviour of high net-worth individuals (HNWs) as lockdown restrictions ease around the globe and people resume spending. Prime property predictions by Knight Frank include buying closer to home while air travel remains suspended and HNWs taking advantage of historically low interest rates to refinance and purchase property.
The property firm also predicts that currencies tied to the US Dollar — which has remained strong during the pandemic — will likely have an advantage, notably among buyers from the US, the United Arab Emirates, Hong Kong and several emerging markets.
With COVID-19 creating a new normal around the globe — and the holiday rental market being severely impacted — another potential trend for buyers to keep a close on is landlords transitioning from short holiday lets to long-term property leases. This will likely be attractive in city destinations including Shanghai, London and other European locations where domestic demand will increase and there will be less reliance on overseas tourism.
Ultimately, prime property continues to prove itself as a sound long-term investment and store of capital for discerning investors. While sales volumes have been substantially revised in quarter two, prime city markets are indeed resilient. Many expect the slowdown to be short-lived with sales picking up in Q3 and 4 this year as regional lockdowns ease and HNWs begin reevaluating their portfolios.