GLOBAL PROPERTY MARKET FORECAST 2014

Developed Nations in Favour

Sometimes the global property market resembles Alice in Wonderland. Only the unexpected can be expected with certainty. Look back at forecasts for 2013 and we can see how difficult it is to predict what might happen in 2014. For example, highly respected economists said British property values would drop 2 per cent last year. In reality, they rose 7 per cent. Continued high levels of foreign investment in London, the introduction of Government subsidies for home-buyers in its Help-to-Buy scheme and a stronger-than-forecast economic recovery were unexpected events that helped lift British home prices.

Whilst calculating accurate property price rises can be problematic, some broad-brush trends are easier to forecast. East Asian governments, like Singapore, implemented measures to cool their overheating property markets in 2013, and they can be expected to try and keep a lid on prices again in 2014. This means values could fall by as much as 15 per cent in Hong Kong and rise modestly at best in China property consultancy, Knight Frank, forecasts. In the BRIC cities of Moscow, Mumbai, Hong Kong and Shanghai investment returns will be low in 2014, because of deteriorating market conditions forecasts property consultancy, Savills.

Bric buyers busy

With their home countries increasingly less favourable for investment, growing numbers of Russians, Chinese and Indians will buy properties elsewhere in 2014. According to Savills, Chinese investment overseas will grow by at least 20 per cent per year over the next decade, a reflection of their increasing wealth. Middle Eastern investment abroad is likely to grow in 2014, as business people seek to avoid conflict zones within their region and others look to re-invest oil and gas profits in international property markets.

Keen to attract Asian and Russian investors are many western countries, whose governments want to stoke up activity in housing markets to fuel faltering economies. Spain and Greece joined Portugal, Ireland and Cyprus in offering residency to overseas investors in 2013, and if the initial rise in buyer enquiries is a guide, this ought to result in increased property sales in 2014.

Small hints of a turnaround in the holiday home markets of battered southern European property markets were recorded in late 2013, with prices rising in Spain's Balearic islands, for example. An influx of wealthy overseas buyers may help to stabilise luxury home prices in Europe's Mediterranean markets in 2014. In Paris, the outflow of wealthy French seeking tax exile abroad is likely to be balanced by an inflow of wealthy foreigners taking advantage of price cuts to purchase trophy homes in this architectural oasis.

eurozone monster

But the Jabberwock, a monster that terrorised characters in Alice's Wonderland, has a European, real-life equivalent – the unresolved eurozone crisis. Continued fear of possible economic collapse among Europeans will suppress home-buying activity within the eurozone, counteracting increased investment by foreigners. The European Central Bank has pumped money into the region's financial system to ensure banks don't go bust and loaned money to individual countries like Greece, but the debt mountains remain, unemployment is high and strong economic growth a distant memory. 

In some respects, eurozone members resemble chaotic characters at the Mad Hatters Tea Party, because some countries, like Portugal, are cutting property taxes to attract investment and then contradicting those moves by raising other property taxes to fund debt repayments, or even, as is the case with Italy, introducing additional property taxes in 2013 and then considering whether to abolish them in 2014 for the same reasons.

Britain "too strong?"

In Britain, estate agents fret that politicians' talk about the imposition of a possible “mansion tax” is deterring foreign buyers. Prices in central London, where foreign buyers are most active, slipped 2 per cent in the final months of last year. However, the capital's record high prices are likely to be a bigger issue for buyers, and this could lead to a slow down in the number of sales made in 2014.

Outside of London, property prices are likely to strengthen as more Britons enter the housing market this year. And yet, Savills warns that Britain's housing market may fall victim to the country's economic success in 2014 if the Pound strengthens on international exchanges, because that might make its bricks and mortar prohibitively expensive for overseas investors.

Tax havens boom

Some Caribbean tax havens have extended residency schemes to attract more High Networth Individuals to their shores, and this could lead to increased property sales in 2014. For example, Barbados introduced Special Entry and Reside Permits last September which allow wealthy individuals to come and go from the island as they please.

The Caribbean's emerging rivals for beach-combing tax exiles, the Indian Ocean nations of Seychelles, Maldives and Mauritius, will continue to grow in our collective consciousness during 2014, as more luxurious resort communities are built on their sandy sea shores.

Key hotspots 

The United States housing market resembles a patchwork quilt. At one extreme, property prices in Manhattan are above their 2007 peak, while at the other end, the bankrupt city Detroit is having much of its housing razed to the ground as inhabitants leave to start new lives in towns and cities with brighter economic futures. Perhaps the US city to watch in 2014 is Miami where Savills says prices for luxury condos are within a whisker of their 2007 peak following an influx of South American second home buyers over the past couple of years.

Other cities around the world that might attract growing numbers of homebuyers in 2014 are Tokyo, Dubai and Hamburg. Tokyo may be ripe for investment, because the city's capital values and rental returns are rising. Dubai's property market, which temporarily topped some international indices for price growth in 2013, will continue to perform strongly in 2014, as its economy bounds forward.

Few international property buyers considered Hamburg in the past, but that is changing. “International standard” housing projects in Germany's largest port city are being marketed to overseas buyers for the first time, including the water-front, Sophienterrassen project where developer Frankonia, is building 191 homes with Karl Lagerfeld-designed communal areas.

Brands popular

Operating at the top end of the housing market Frankonia is a well-known brand in Germany. Increasingly, when buying newly-built properties overseas, home-buyers want to purchase from reputable brands, because they feel more confident about how the development will turn out. The services and facilities available to residents at branded schemes, including gyms and home cleaning, appeal too. With growing numbers of developments branded and serviced by top hotel chains like the Mandarin Oriental, their popularity is likely to grow stronger in 2014.

Lastly, a look at an overhyped housing market - Rio. Estate agents say hosting the FIFA World Cup 2014 and Olympic Games 2016 will result in increased international attention which will boost sales of homes to foreigners. However, the chaotic organisation of these sporting events, street riots and high levels of crime are generating the kind of publicity that most estate agents could do without. Also, much of the promised new infrastructure will not be completed. 

If the property market still appears a bit bewildering in 2014, consider the Cheshire Cat's advice to Alice: “You just go where your high-top sneakers sneak, and don't forget to use your head.”