London is expected to see house price growth of 6% in 2023 – the third highest amongst Prime cities, Knight Frank’s Global Prime Forecast has revealed.
The British capital is expected to have a strong year thanks to the gradual return of international buyers, as well as the weaker pound, which is especially empowering US buyers.
The only cities expected to surpass London are the American cities of Miami (8%) and Los Angeles (7%), while Madrid, Spain, (6%) and Seoul, South Korea, (5%) make up the top five.
On a global level markets are starting to slow after a post-pandemic uplift.
Across the 25 cities tracked, Knight Frank now expect Prime prices to rise by 4.4% on average in 2022, down from 6.1% six months ago.
Meanwhile in 2023 growth should become more muted, averaging 2.8% growth across all 25 cities.
Next year prices are even predicted to fall in Vancouver, as the Canadian government is banning foreign property purchases from the start of next year, as well as Melbourne, Australia.
In its commentary, Knight Frank wrote: “The recession threat has broadened, inflationary pressures have soared and mortgage rates are on the up.
“Although the prime residential market sector has a higher proportion of cash buyers and therefore could be considered less exposed to higher mortgage rates, tighter monetary policy and its impact on economic growth and hence wealth creation is inevitably influencing prime markets too. But the picture is nuanced.
“Despite the reduction to 4.4%, this still represents strong growth, outpacing our prime index’s growth in nine of the last 10 years.
“Of the 25 cities tracked 11 cities are expected to see weaker performance than that predicted six months ago.
“The price forecast for five remains unchanged and perhaps surprisingly nine are predicting stronger price growth than anticipated at the end of 2021.”
Knight Frank summarised that in most countries a strong labour market, rising incomes, the increased equity in prime homes accrued during the pandemic and the high proportion of fixed rate mortgages will mitigate the impact of the slowdown.