Property | London, NYC, HK no longer immune to housing slump

In the years since the financial crisis, global cities like London, Hong Kong and New York appeared to defy housing-market cycles, thanks to a concentration of financial jobs and the self-fulfilling belief that they offered investors a safe haven. Now every release of data seems to turn those assumptions on their head.

In Manhattan, the median condo price dipped below USD1 million for the first time in three years. Hong Kong home values endured their longest losing streak since 2008, while prices in outer London neighborhoods fell for the first time since 2011. Sydney home owners are grappling with the worst real estate slump since the 1980s.

Luxury residential prices are growing at the slowest rate since 2012, according to a Knight Frank index of prime properties in 43 cities. Where some see an orderly retreat, others see cause for concern. A November working paper by the International Monetary Fund warned that the tendency of housing prices in global cities to move in sync means that local shocks could upend markets around the world.

There are a few global cities that affect “the sentiment about risk perception,” said Albert Saiz, a professor of urban economics and real estate at the Massachusetts Institute of Technology. “If New York and London are catching a cold, the primacy is large enough that they might have an impact on the overall market.”

International investors in search of higher-yielding investments have poured cash into the biggest, most-expensive housing markets, pushing prices ever upward. Governments became concerned the gains were unsustainable, and reacted with measures aimed at curbing the flows of international money.

U.K. lawmakers will publish details later this month of a tax on foreign real estate buyers in London. That plan follows moves to increase charges on second homes and properties owned by corporate entities. The government also eliminated tax breaks for rental homes bought with mortgages. Home prices in the most-expensive parts of London are down 19 percent from their peak in 2014, according to data from Savills Plc, but the move to curtail investor purchases is still on.

Similar dynamics are playing out around the world. The number of home sales in Vancouver dropped 32 percent in 2018 from the previous year, following a series of new taxes, stricter mortgage rules and rising interest rates. Median prices in Auckland registered their first annual drop since 2008 after the New Zealand government passed legislation to restrict foreign buying that it said was partly to blame for escalating housing costs. Home prices have dropped 11 percent in Sydney from their 2017 peak after government restrictions on foreign purchases and tighter credit. Bloomberg