Auckland, Seoul, Manila record highest prime residential price increases in APAC

Luxury home prices in Auckland increased 17.5% in 2020.

Knight Frank’s latest edition of The Wealth Report reveals the result of its Prime International Residential Index (PIRI 100). The index tracks the movement of luxury residential prices in 100 cities and second home markets globally for the 12-months ending December 2020, with four Asia Pacific cities coming in at the top five.

Globally, prime residential prices performed better than expected in 2020. The 100 locations covered by PIRI 100 recorded average price rises of 1.9%, up from 1.8% in 2019. In Asia-Pacific, 14 out of 23 prime markets recorded price growth, highlighting the resilience of prices in the region.

Auckland leads the index with average prices ending the year 18% higher. New Zealand’s handling of the COVID-19 crisis, its rapid economic recovery, ultra-low mortgage rates and a limited supply of quality stock were behind this surge. However, the prices are expected to normalise as government-supported policies slowly tighten to maintain a healthy market.

Victoria Garrett, Head of Residential, Asia-Pacific at Knight Frank said, “The low borrowing costs and the improved vaccine optimism seen towards the end of 2020 were the main drivers that aided some of the prime residential markets in Asia-Pacific through the pandemic storm.”

Cities in the Asia-Pacific region occupy 5 of 10 top spots in the PIRI 100 ranking, reinforcing their firm market fundamentals that allowed them to rebound at unexpected rates. Particularly in the Chinese Mainland markets, property sales volumes across 30 major Chinese cities had returned to the average daily levels observed in 2019.

In the land down under, Australasia was one of the top performing regions, averaging an annual growth of 4.9%, due to the surge of pent-up demand as lockdown eased and homeowners re-evaluated their lifestyles. Perth (+4%) was Australia’s frontrunner, and Sydney (+1%) registered its highest volume of prime sales ever in Q3 of 2020.

“Grounded by travel bans, the desire to live in green open space that enables a better work-life balance has never been greater. Wellness, wellbeing and family have been at the forefront for many homebuyers in Australia and New Zealand who have been looking within their country to upgrade their main residence or purchase a holiday home closer to home; Expats have been returning home and luxury buyers are also looking to upgrade their main residence or invest in a secondary residence as a result of the bullish stock market,” said Garrett.

Leonard Tay, Head of Research, Knight Frank Singapore, shared, “However, unlike many other cities in the Asia-Pacific, prices of primes homes in Singapore did not grow in similar fashion and instead remained relatively unchanged, contracting by a slight 0.2% annually in 2020. The prolonged and continuing travel measures restricting the inflow of visitors into the city-state prevented potential foreign investors interested in purchasing homes in Singapore from physically viewing these units, resulting in an overall 20.4% year-on-year (y-o-y) decline in sales of luxury homes compared to 2019. Together with a lack of new launches, the top-tier class of homes in Singapore struggled to gain traction in the year of the pandemic.

“Nevertheless, as Singapore continues to be an oasis for investments due to the stable political environment as well as the extensive measures implemented to mitigate any recurrences of infections. The demand for luxury homes in the city-state is projected to grow in 2021 as investible properties remain at comparatively affordable price points, and this is expected to strengthen foreign buyers’ confidence in the market, which could translate into greater sales of prime non-landed residential units once the COVID-19 vaccine distribution proves to be successful and travel restrictions ease.”

Homebuying attitudes

This outlook is further reinforced in Knight Frank’s survey of over 600 private bankers, wealth advisors, intermediaries and family offices, the Attitudes Survey*, which revealed that one in five UHNWIs in Asia Pacific is planning to buy a new home in 2021, with the biggest reason being upgrading of their main residence domestically, followed by a holiday home – either domestically or in US, UK and Australia.

“Noticeably, there’s a change in strategy in the ultra-wealthy due to the global uncertainty that the COVID-19 pandemic has caused. As a result, they are investing in additional homes domestically wherever they can (due to scarcity of stock), followed by second homes in cities and countries that best fit their needs after re-evaluating their lifestyles in the new normal,” added Garrett.

In terms of home attributes, the respondents prefer a home with their offices within or close by. This is followed by a home with access to transport links (for Asian buyers who prefer urban areas), and homes with an outdoor space within or nearby (for Australasia buyers who prefer rural or coastal areas).

To this, Tay continued, “Despite having gone through a difficult year, the luxury residential market in Singapore continues to be popular among Asians looking for a home in Asia. Singapore ranked as the top Asian territory of choice behind the US, the UK and Australia when purchasing a new home among the Asian wealthy, in front of Japan. Home buyers from India, Japan, Malaysia and South Korea ranked Singapore in their top-five list of locations when considering investment homes abroad.

“Singaporeans themselves preferred their own home country to in front of other locations, citing proximity of leisure facilities and amenities, as well as transport links as their important attributes in their decision making.”
 

*In Q4 2020, Knight Frank surveyed over 600 private bankers, wealth advisors, intermediaries and family offices managing approximately US3.3 trillion on behalf of UHNWIs across the globe
**Excluding Cambodia, Indonesia and Thailand

To read the full Wealth Report 2021, visit: https://www.knightfrank.com/wealthreport