In a surprising turn of events, the capital of the Philippines, Manila, has surged ahead of Dubai to claim the top spot in the global market for prime residential properties in the September quarter of 2023. This revelation comes from a report published by property consultancy Knight Frank, which ranks major cities worldwide based on the price appreciation of prime homes over the past year.
According to the report, prices of prime residential properties in Manila have recorded an impressive gain of 21.2 percent over the past year. This remarkable increase is attributed to strong domestic and foreign investments, propelling Manila to the prime position in the third quarter of 2023. The report meticulously tracks prime home prices across 46 cities worldwide, offering an insightful perspective on the real estate market’s global dynamics.
Dubai, one of the wealthiest cities in the United Arab Emirates (UAE), may have seen a year-on-year price increase of 15.9 percent, but it slipped to the second position on the list. Shanghai, China’s largest metropolis with over 28 million residents, managed to secure the third spot with a 10.4 percent annual price increase. Meanwhile, Hong Kong’s prime homes, defined as the top 5 percent of the residential market in terms of value, lost 1.7 percent of their value over the year and decreased by 0.6 percent in the third quarter compared to the previous quarter.
The continued struggle of Hong Kong’s prime home market performance is primarily attributed to soaring interest rates. According to Martin Wong, director and head of research and consultancy for Greater China at Knight Frank, these losses are expected to narrow as overseas homebuyers return. They are drawn by the easing measures announced in Hong Kong Chief Executive John Lee Ka-chiu’s latest policy address. The report also notes that average prices globally rose by 2.1 percent in the 12-month period leading up to September, indicating a semblance of stabilization in global housing markets despite significantly higher mortgage rates.
Despite these gains, it’s worth noting that while 67 percent of the cities analyzed in the report saw an increase in prices over the year, only 63 percent witnessed an increase from the previous quarter. This suggests “lingering uncertainty,” primarily due to the potential for further interest rate hikes, as the report adds.
Liam Bailey, Knight Frank’s global head of research, emphasized the need for caution. He stated, “The improvement in average annual house price growth will be welcomed by prime market homeowners but shouldn’t be overstated. Higher rates mean we have moved into a world of lower asset price growth – and investors will need to work harder to identify opportunities for outperformance to secure target returns.”
The global housing market, including the luxury segment, continues to grapple with ongoing uncertainty over inflation and interest rate risks. This, Knight Frank warned, is likely to limit price rises in the medium term. The report suggests that a more sustained upswing in demand and pricing will only occur when interest rates start moving lower. However, it cautioned that such a shift is “unlikely to take place before mid-2024.”
Manila’s rise to the top of the global prime residential property market represents a significant shift in the real estate landscape. While Dubai continues to see substantial price increases, it now faces competition from emerging markets like Manila. Investors and homeowners alike will be closely watching these developments, but uncertainty stemming from interest rates remains a major factor influencing the global housing market.
(Source: Yulu Ao | SCMP)
