Hong Kong, Singapore and Shanghai are the only locations, based on the latest available data, where the cities’ prime markets have not outperformed the mainstream housing market in the wider country or territory.
London, Paris and St Petersburg are the only cities where prime property prices have reached their pre-recession peak. A number of the Asian cities tracked have yet to experience a decline during this cycle and continue to follow an upward trend.
Liam Bailey, Head of Residential Research at Knight Frank, said: "One of the most noticeable outcomes from the recent global recession was the divergence between property performance in the mainstream markets (generally weak) and the prime or luxury markets (generally much better).
"The Knight Frank Prime Global Cities Index has tracked this process, which until recently seemed to be strengthening – with improving conditions in the luxury global city markets set against renewed price falls in the mass markets, especially in the US, the UK and most of Europe.
"Our latest results confirm that annual price growth in prime city markets has slowed rapidly (from nearly 14% in Q2 2010 to barely 7% in Q2 2011). With growing concerns over sovereign debt and even for the outlook of the global economy, it seems likely that this process will continue – with still lower growth in the world’s prime city markets a likelihood.
"I think it would be wrong to become too fixated on the downside risks to the market we track in this index. The fact is that prime residential markets have acted as ‘safe-havens’ for investors over the past two years – with growing demand for property in London, New York and other key global cities as economic and geo-political concerns have pushed investors to look for stable locations for their wealth.
"In these important global markets the biggest risks seem to be concentrated for the time being in Asia – with the ongoing process of managed market cooling being buffeted by rapid supply growth – the outcome of this process is likely to determine how healthy the Prime Global Cities Index is looking a year from now."
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