In the second quarter of this year, Berlin was the city with the strongest rate of annual house price growth, according to Knight Frank’s latest Prime Global Cities Index.

The Prime Global Cities Index, which tracks the movement in luxury residential prices across 46 cities, rose by 1.4% in the year to June 2019, up slightly from 1.3% in March 2019. However, it was still substantially lower than its four-year average of 3.8%.

Despite Berlin leading the index with the best yearly house price growth, its rate of annual growth fell from 14.1% in March 2019 to 12.7% in June 2019. Frankfurt, by contrast, saw its annual price growth rise from 9.6% to 12.0% over the same period.

With prime prices in Berlin and Frankfurt currently around €11,500 per sq m and €13,500 per sq m respectively, they both remain competitive by European standards.

An upwards trend

Some 35 of the 46 cities (76%) tracked by Knight Frank’s index registered price growth in the year to June 2019. Of the eleven that saw prices drop year-on-year, Istanbul (-9.9%) and Vancouver (-13.6%) were home to the weakest markets.

Within the top ten there are now six European cities, down from seven last quarter as Edinburgh witnessed price growth moderate (4.3%), reducing it to 12th place. Additionally, Madrid and Paris are following similar paths, recording annual growth of 5.2% and 5% respectively.

In both cases, though, the headline figure hides variations at a neighbourhood level. In Madrid, for example, areas such as Chamberi and other outer non-prime districts are performing strongly. In Paris, the Left Bank, and especially the 6th and 7th arrondissements, are now pausing for breath having seen more than 11% price growth since 2017, whilst the 18th arrondissement continues its upward trajectory.

Elsewhere, tier 1 cities in mainland China such as Beijing (4.5%) and Guangzhou (2.7%) witnessed prime price growth strengthen in the first half of 2019. This came as optimism increased surrounding the possible relaxation of housing policies, despite the authorities reiterating their stance against this speculation.

In Hong Kong (growth of 0%), the ongoing political turmoil – with protests recently entering their eleventh consecutive weekend – and immediate concerns over the US/China trade war has severely hampered price growth, despite the opening of various cross-border infrastructure projects which should boost economic links in the Pearl River Delta over time.

Singapore’s prime market (0.9%) remains similarly subdued, with buyers adjusting to the latest round of regulations. Despite this, though, a number of record sales prices have been achieved so far in 2019.

According to Knight Frank, sluggish worldwide economic growth explains the wave of interest rate cuts seen in the last three months – including in the US, Turkey, Russia and Australia, as well as Brazil, South Africa, Thailand and South Korea – as policymakers attempt to stimulate growth.

Much, Knight Frank says, hinges on the next three months. “With stronger headwinds on the horizon we expect the index to moderate further in the second half of 2019 before strengthening in 2020,” it said.

You can see the full report on the latest index here.