Trophy home sales in North America, Europe could cool in 2012

November 28, 2011 07:22PM

As the super-wealthy become wealthier and continue to seek so-called “safe-heaven” investments, prime residential real estate markets are likely to continue to see price increases in 2012, Knight Frank’s Prime Global Forecast said today. However, if calamity strikes in European markets, even high-end residential property in global cities may suffer, the logic goes.

“If the euro was to collapse, or a similar catastrophe was to strike, all bets really would be off and we would expect much weaker performance across all of our prime markets,” Liam Bailey, head of residential research for Knight Frank, said in the report.

While the recovery in 2009 sent many investors clamoring for trophy real estate, that trend may come grinding to a halt if and when prime markets are “undermined by domestic economic reality,” as Bailey put it. Weak prices for mid- and lower-market housing, combined with targeted tax and regulatory changes could put a damper on prime housing prices in North America and Europe.

In both Europe and Asia there are also marked disparities between cities, as Hong Kong is expected to see price declines, with Bejing prices projected to go up between 5 and 10 percent. Prices in Geneva and Zurich are expected to drop, while Paris and Moscow will see price increases.

Kate Everett-Allen, global data coordinator at Knight Frank’s international residential research arm, was a bit more optimistic. She said she expects prices in most prime markets to remain flat at worst, and foresees Jakarta and Nairobi, the markets projected to have the strongest 2012, to rise 20 percent in the next year. — Guelda Voien