Global luxury real estate market eyes downturn

The luxury real estate market could be heading towards and economic downturn at least rents of these places are pointing to that direction. According to the quarterly report of the Knight Frank Research, rents on the luxury residential places are down all across the globe. Its Prime Global Rental Index, which tracks rents across the world in the luxury end of the market dropped for a third consecutive quarter and there are strong reasons to believe that the recent referendum in the UK and the subdued growth across the global economy are likely to push for this trend to continue.

Below are some city level data for last 12 months.

• Rents have declined most in Nairobi by 7.9 percent, which could be associated with economic as well as political turmoil in Nigeria. In Hong Kong, the rents have declined by 5.2 percent, followed by Geneva (-4.4 percent), Singapore (-3.6 percent), New York (-2.3 percent), Zurich (-1.7 percent), and London (-1 percent).

Some cities, however, do registered gains.

• Rents have gone up sharply in Toronto by 8.9 percent. Some cities in China, Guangzhou (+5.3 percent) and Shanghai (+1.4 percent) registered gains. Cape Town in South Africa also registered a small gain of 1.5 percent.

Investors should keep a lookout whether this slowdown trickles down or not.