Recent findings from the Knight Frank Global Super-Prime Intelligence Report have cast an intriguing spotlight on the current state of the luxury property sector, offering key insights that both seasoned investors and novices can learn from.

The Bigger Picture: Global Property Transactions in Flux

Knight Frank’s comprehensive study focuses on global super-prime property transactions, specifically those with sales above the $10 million mark. The findings reveal a significant slowdown in the second quarter of 2023. Here are the numbers at a glance:

• Q2 2023: 422 transactions
• Q1 2023: 475 transactions (down 11% from Q2)
• Year-on-year: Down by 13%

While there’s been a decline in recent sales, it’s worth noting that when we expand our perspective to a 12-month window ending in June 2023, a total of 1,638 transactions were recorded globally. This is a significant jump from the 1,009 sales seen before the pandemic in 2019.

Spotlight on Standout Markets: Who’s Up and Who’s Down?

While the general trend indicates a slowdown, there were a few markets that swam against the tide. Here’s a snapshot of these regions:

• Dubai: An impressive 79% annual increase
• Sydney: Up by 46%
• Paris: 17% growth
• Geneva: A modest 7% rise

On the other end of the spectrum, some key US markets witnessed dramatic declines. Los Angeles led this trend with a steep 63% drop.

Liam Bailey, Knight Frank’s Global Head of Research, observed, “While super-prime sales have retreated from recent highs, they still outpace pre-pandemic levels. Interestingly, Dubai remains a leader, with London and New York still clocking in healthy volumes.”

One challenge Bailey highlights is the supply constraint that many markets are grappling with. A dearth of new development starts between 2020 and 2022 foreshadows a potentially lean 2024, making the existing stock more competitive and possibly stabilizing prices.

A Deep Dive into Sales Volumes

The total sales volumes for Q2 2023 were pegged at a staggering US$7.3 billion across 12 key markets. Of these:

• Dubai stood out with US$1.5 billion in sales
• London and New York followed suit, each boasting sales over US$1 billion

If we pull back and assess the sales volumes in the 12 months up to June, the figure touches just under US$30 billion. This is a drop from the US$40.7 billion peak in 2021 but remains substantially higher than the pre-pandemic figure of US$18.6 billion in 2019.

London’s Sturdy Stance Amidst Change

London’s real estate market has been a beacon of resilience in 2023, even though it hasn’t quite matched the dazzling performance of 2021. Overseas demand and new development launches have fortified sales numbers.

However, there’s a caveat. A looming squeeze in super-prime development opportunities in London may translate into sales slowdowns in 2024 and beyond. This projection is based on the assumption that existing property owners might not be inclined to trade their assets.

Paddy Dring, Head of Knight Frank’s Private Office, reflected on the London super-prime market: “Though trading conditions have been subdued recently, sales remain commendably above pre-pandemic levels. This indicates a sustained buyer interest, both domestically and from overseas.”

A factor bolstering this resilience? The higher prevalence of cash sales in comparison to the broader market. Dring remains optimistic, stating, “With London property prices still below their 2016 peak, buyers discern value in the market. This augurs well for a busier autumn.”

A Broader UK Property Perspective

Stepping away from the super-prime category, the latest RICS Residential Market Survey highlighted some concerning trends in the UK housing market. The survey reported the most negative readings for house prices since 2009 and recorded the largest decline in newly agreed sales since the pandemic began.

In Conclusion: What Aspiring Property Investors Should Note

The landscape of global luxury property is shifting, and while there are regions outperforming others, the overall trend seems to be one of cautious optimism. For those considering an investment, it’s crucial to stay informed, keep an eye on emerging markets like Dubai, and understand the intricacies of stalwarts like London. As always, the key to successful property investment lies in knowledge, timing, and adaptability.