The latest edition of Knight Frank’s Prime Global Cities Index has shown that the price of prime residential property in Dublin increased by 1.4% in the first quarter of 2016. This represents the second consecutive quarterly increase in the price of prime property in Dublin, defined as the top 5% of the housing market, following declines in the second and third quarters of 2015.
Globally, the Index increased by 3.6% in the first quarter, which represents the seventh consecutive quarter in which the index has increased by between 3-4%, indicating that the global prime property market has entered a sustained period of growth. However, only 12 of the 35 cities measured by the index recorded price increases in the first quarter which points to the presence of a two tier market, where large price increases in cities in Asia and North America are driving global growth at the expense of weaker growth in many European cities. The report also warns that new regulations, in the form of measures to improve transparency, new taxes or fees for foreign buyers, are increasing and could affect the future performance of the global market. Despite this, the impact on the market of such measures is largely dependent on market fundamentals and where each market is in relation to its property market cycle.
The index also provides a useful benchmark for the performance of the Dublin prime property market. Dublin now sits in 21st position globally having recovered from 26th position at the end of 2015. Dublin also outperformed other major global cities such as Sydney (1.1%), Los Angeles (0.7%), New York (-0.4%) and Hong Kong (-2.1%). While Vancouver leads the rankings for the fourth consecutive quarter, the Chinese city of Shanghai recorded the strongest quarterly rate of growth, growing by 9.3% in the first quarter. Record-low interest rates and cheap finance has stimulated demand in Shanghai leading to price growth of 20% year-on-year, however, in March the government tightened mortgage lending rules which is likely to result in slower growth in the second quarter of 2016. There is a debate whether this pace of growth represents a vote of continued consumer confidence in the Chinese economy or whether the dynamic is due to a safe haven flight to residential property stemming from volatility in the Chinese stock market.
Second only to Geneva, Dublin had the strongest performing market in Europe in the first quarter. This contrasted strongly with the growth in prices across many European cities, including Monaco, Vienna, Rome, Zurich, Paris and London, which remained flat in the first quarter. The performance of the London market in particular has been affected by a series of stamp duty changes. As of 1 April 2016 buy-to-let investors and second-home buyers pay an extra three percentage points of stamp duty on any UK purchase.
A separate analysis conducted by Knight Frank, using data from the Property Price Register, has shown that during the first quarter of 2016, the value of Dublin’s prime residential property market was approximately €143 million, while the value of Dublin’s super prime residential property market, defined as the top 1% of the market, was €50 million. Finally, the high-end market has a disproportionate share of the total value of sales with the top 5% of sales accounting for 17% of the total value of the market in the first quarter while the top 1% of sales accounted for 6% of the value of the market.