PETALING JAYA (Aug 5): Cities are now outperforming national housing markets, with 43 cities registering an annual price growth above 10%, up from just one year ago, according to Knight Frank’s latest report Knight Frank’s Global Residential Cities Index, published in July.
The report also confirmed that average prices across 150 cities are rising at their fastest rate since 2007.
In a statement, Knight Frank Malaysia international residential project marketing associate director Dominic Heaton-Watson said: “Far from underperforming their national housing markets, as many expected a year ago, cities are now outpacing them.”
Across 150 cities, prices increased by 7.4% on average in the year to the first quarter of 2021 (1Q2021); the comparable figure across 56 countries and territories was 7.3%, according to the report.
Heaton-Watson highlighted the contributing factors: “Three factors may push prices higher in the short to medium term. Firstly, the fear of missing out — with borders closed investors may look closer to home to take advantage of rising prices. Secondly, some buyers may be keen to lock in to lower mortgage rates before interest rates start to shift higher and finally, with large sums of accrued savings evident in some markets, a second home may now be within reach for some."
The index results are backed up by Oxford Economics’ latest Global Cities findings. “We are still mostly sceptical whether healthy cities will experience major losses of people, work or real estate demand. But the pandemic may have slightly speeded up the shift to smart cities, intelligent buildings, artificial intelligence and the network economy,” said Heaton-Watson.
According to the report, bubble talk is likely to recede as central banks keep a close eye on house prices and policymakers start to intervene. First it was New Zealand, then the European Central Bank (ECB), now Singapore has announced it is highly vigilant on house prices.
To date, 22 central banks have raised interest rates this year according to Central Bank News and that figure is likely to be on the uptrend.
Meanwhile, a shortage of residential stock in key prime markets, alongside tighter lending rules and upbeat unemployment forecasts were amongst the other reasons Knight Frank cited as to why bubbles will slowly deflate rather than burst as in 2008.