The tech industry is driving luxury real estate prices in cities such as San Francisco, although even expensive U.S. cities remain a bargain by global standards — particularly China.
That’s according to Knight Frank’s latest Prime Global Cities Index, which tracks luxury real estate price changes across 41 international cities. Overall, the index increased by 4.3 percent year over year in March, slightly higher growth than recorded in the fourth quarter of 2016. Twenty-seven of those cities recorded some rate of annual appreciation, one saw no price growth, and 13 experienced losses.
Annual home price growth in the world’s technology centers — which includes cities like San Francisco, Toronto, Seoul, Stockholm, Berlin, and Melbourne — outstripped the overall index, increasing by 7.4 percent from the first quarter of 2016 to the first quarter of 2017. By contrast, prices grew by 3.2 percent in financial hubs such as New York, Hong Kong, London, and Tokyo.
Knight Frank says that the index’s overall growth was largely driven by Asian countries, primarily China. Chinese cities accounted for three of the top five global real estate markets where prices grew the fastest: Guangzhou (36.2 percent), Beijing (22.9 percent), and Shanghai (19.8 percent). Combined, prices in those three cities grew by an average of 26.3 percent year over year in March.
Toronto and Vancouver are the two North American cities to crack the top 10 for annual appreciation, with respective home price gains of 22.2 percent and 7.9 percent. Toronto’s robust growth prompted lawmakers to enact policy changes, including the implementation of a 15 percent foreign-buyer tax.
Although U.S. cities are rising on the index, price growth was lower than the overall average. At No. 14, Miami was the fastest-appreciating U.S. market, with annual price growth of 4.1 percent. Los Angeles saw 2.5 percent growth, ranking it No. 20, followed by San Francisco (No. 21, 1.8 percent growth) and New York (No. 22, 1.7 percent growth). Knight Frank notes that the Los Angeles, San Francisco, and New York real estate markets are all trending downward.
Surging price appreciation in Asia is one of several factors fueling Chinese demand for U.S. real estate, which investors still perceive as a bargain and a safe place to park their money. That was one takeaway from last week’s “Golden Road From China” event, a panel of experts – including Pacific Union CEO Mark A. McLaughlin — who assembled in San Francisco to discuss Chinese investment trends in the Bay Area.