Beach Front Luxury Properties Hit Hardest in Downturn

ublished: 24th March 2010

Beach-front property hit hardest by global downturn
Beach-front property hit hardest by global downturn

Prices of coastal second homes were hit hardest by the global downturn in 2009, according to new data from Knight Frank.

In their annual Wealth Report published yesterday, Knight Frank reveal an uneven picture of house price performance both by geographical market and property type.

Overall, high-end residential house prices fell 5.5% in 2009 but prices in city centres rose by 0.4% while coastal second homes and ski property prices fell 13.9% and 12% respectively.
The divurgance is explained partly by the strong performance of a small number of city centre markets in the second half of 2009, most notably Shanghai (up 52%), Beijing (up up 47%) and Hong Kong (up 40.5%).


Super-rich buy up “cheap” property in capital cities



In the uncertain economic environment and with a supply of cheap credit, the super-rich have been flocking to buy super-prime property in capital cities. The trend was no doubt enhanced by the sharp drop in prices in 2008 which led to a perception that property was cheap by historical standards.

Indeed many of 2008’s worst performers, were the top performers of 2009. London moved from 53 to 9 in the rankings and Hong Kong moved from 55 to 3 for example.


Coastal properties could buck the trend in 2010 and 2011



The evidence suggests that there is merit in investing in good quality property in locations that have fallen the most in value. After all, markets tend to over-correct on the way up and under-shoot on the way down. In markets with strong demand and limited supply, price reversals can happen quite quickly as price falls result in construction projects being put on hold which puts upward pressure on prices.

Although holiday home markets tend be more fickle than city centres, don’t be surprised if some of holiday home destinations at the bottom of the list appear towards the top in next years figures. Now could be the time for your clients to invest.