NYC's Inflection Point & Luxury Spending

April 15, 2021
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Prime fortunes

Prime global housing markets have had a resilient year, all things considered. Pandemic-induced factors such as travel restrictions and a clamor for rural property have mixed with historic curbs such as tax increases to create a large spread of annual price movements from 17.5% growth in Auckland to a 7.3% decline in Bangkok.

Today, we take a closer look at London and New York City, two of the most closely watched prime housing markets. Both are showing signs of stabilizing after a period of price falls.

Last month, the number of transactions in prime central London hit the highest level since March 2016, according to new analysis from Tom Bill. That was driven both by a broader property market surge amid the reopening of the economy and by an influx of purchases ahead of the April introduction of a 2% stamp duty surcharge for overseas buyers. In prime outer London, where there are fewer overseas buyers, transaction numbers also climbed to their highest level since March 2016, suggesting economic optimism was the dominant driver.

Average prices fell by 3.5% in prime central London in the year to March, the smallest decline since the onset of the pandemic 12 months ago. The market is likely to strengthen further once international travel restrictions are relaxed.

NYC's inflection point

Manhattan also appears to be reaching an inflection point. Prices have been falling for three years, however December marked a turning point as sales activity ticked upwards, according to new analysis from Kate Everett-Allen. By February 2021 the number of signed contracts for Manhattan condos was up 55% year-on-year.

Like London, the market is likely to strengthen further once global mobility improves. Overseas buyers accounted for 15% of all New York sales in 2020, down from a record 30% in 2014, according to Miller Samuel. There are other, more localized drivers, including a potential reversal of the 2017 State and Local Tax (SALT) deduction that could generate more demand from outside the state of New York. Our current forecasts assume prices will end the year flat.

For a view from the coalface, Chris Druce speaks to Jason Mansfield, who covers the North American region for Knight Frank, and Mark Harvey, head of Knight Frank’s International Department.

Luxury spending

Sales at LVMH soared in the first quarter amid signs of a boom emerging in luxury spending. Sales were up 30% compared to the same period a year ago, amid the first lockdowns, and even surpassed 2019 levels by 8%.

Performance of the group, which is home to 60 brands spanning fashion house Louis Vuitton, champagne producer Moët & Chandon and luxury yacht manufacturer Princess Yachts is a good barometer of sentiment among the world's wealthy.

Part of this story is the group's swelling client base. Lower interest rates and more fiscal stimulus have caused asset prices to swell, driving the world’s ultra-high-net-worth population 2.4% higher over the past 12 months to more than 520,000, according to The Wealth Report 2021. Asia will see a 39% expansion in its UHNWI population over the next five years, compared with the 27% global average.

We've also witnessed a clamor for (relatively affordable) luxury pick-me-ups during the pandemic, particularly in Asia. Hermès handbags, for example, topped the Knight Frank Luxury Investment Index last year, with prices rising by 17%.

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