Manila Overtakes Hong Kong as Top Global Prime Property Market: Knight Frank

In the latest property market report published by Knight Frank, Manila, the capital of the Philippines, has surged ahead of Dubai to claim the top spot as the world's hottest market for prime residential properties in the third quarter of 2023. The report evaluates major cities worldwide based on price appreciation over the past year.

Manila witnessed a remarkable 21.2% increase in prime residential property prices over the past year, driven by robust domestic and foreign investments. This exceptional performance secured Manila's position as the leading market for the third quarter of 2023 among 46 cities analyzed by the report.

On the other hand, Dubai, one of the wealthiest cities in the United Arab Emirates, slipped one place to second on the list, despite recording a substantial 15.9% year-on-year price increase. Meanwhile, Shanghai, China's most populous metropolis, with over 28 million residents, advanced two places to secure the third rank with a 10.4% annual price surge.

Hong Kong, traditionally a significant player in the prime property market, witnessed a decline in its ranking, dropping to the 36th position from 35th in the previous quarter. Prices of "prime" homes in Hong Kong, defined as the top 5% of the residential market in terms of value, decreased by 1.7% over the year and decreased by 0.6% in the third quarter compared to the previous quarter.

The challenging performance of Hong Kong's prime residential market can be attributed to the persistent impact of soaring interest rates, as noted by Martin Wong, Director and Head of Research and Consultancy for Greater China at Knight Frank. However, Wong anticipates a narrowing of losses as overseas homebuyers return, drawn by the easing measures announced in Hong Kong Chief Executive John Lee Ka-chiu's latest policy address.

Globally, average property prices rose by 2.1% over the 12-month period ending in September, indicating signs of stability in global housing markets despite significantly higher mortgage rates. However, the report highlighted that while 67% of the cities observed a year-on-year price increase, only 63% witnessed a quarterly increase. Lingering uncertainty, primarily driven by the potential for further interest rate hikes, was emphasized in the report.

Liam Bailey, Knight Frank's Global Head of Research, commented, "The improvement in average annual house price growth will be welcomed by prime market homeowners but shouldn't be overstated." He also noted that higher rates signify a shift into a world of lower asset price growth, necessitating more effort from investors to identify opportunities for achieving target returns.

Knight Frank cautioned that ongoing uncertainty related to inflation and interest rate risks continues to impact all segments of the global housing market, including luxury properties. Achieving more sustained demand and pricing growth is expected only when interest rates start to decline, which the report suggested was unlikely to occur before mid-2024.