Matrix Blog

Knight Frank just released their Global House Price Index which showed record results:

Growth of 8.4% in 2013 represented the highest annual rate of growth since our index started in 1995.

Dubai lead the way with a 34.8% jump in prices Y0Y while Ukraine rounded out the bottom in 56th place with a 25.9% decline over the same period. The US was ranked 9th overall.

The full report is now available and chock full of great info and insight.

Tags: Global House Price Index, Knight Frank, Kate Everett-Allen

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Had a great conversation with Trish Regan on her Bloomberg TV show “Street Smart” about the Manhattan and Brooklyn rental markets and rent versus buy. This was in connection with the February Elliman rental report we published earlier that day.

It was windy and 18 degrees outside so I think I look a bit disheveled. But always fun to connect with everyone at Bloomberg whenever I visit (and maintain my Foursquare mayorship of the “green room”).

Tags: Bloomberg TV, Trish Regan, Street Smart

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Jed Kolko does a nice job summarizing what the general housing market may look like in 2014 after the new home sales report came out today.

My big takeaway was that any housing market improvement will be more affected by local job and income growth rather than the “rebound effect.” This phenomena occurred in markets that were hit hardest by the downturn, yet saw the largest price increases.

I’ve added “rebound effect” to my 2014 phrase list, right after “polar vortex.”

Tags: Jed Kolko, Commerce Dept, New Home Sales, Census, Polar Vortex, Rebound Effect, Sarah Portlock, Jonathan House

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Today the market report covering the Manhattan/Brooklyn rental market for January 2014 that we prepare for Douglas Elliman was published. We’ve authored the Elliman Report series since 1994.

One of the trends we’ve observed has been the recent expansion of the use of concessions by landlords to keep vacancy low as evidenced in the above chart.

You can download this report and others, view charts in a variety of markets and build custom data tables. See the report press coverage here.

Tags: Rentals, Manhattan/Brooklyn Rentals

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According the National Association of Realtors, their Pending Home Sales Index fell 5.6% from August to September 2013 (seasonally adjusted), the largest monthly drop since May 2010 after the artificial prop of the 2009-2010 federal homebuyers tax credit expiration caused contracts to drop by nearly 1/3 from bloated levels.

Removing seasonality from the results makes the year-over-year adjustment show nominally 1.1% higher contract volume from September 2013 than in 2012 rather than a 1.2% decline. Still, the results were weak.

Why did pending sales post weaker results?

• Don’t blame the partial government shutdown – that came later.
• After the May 2013 Fed surprise announcement, fence sitters surged to the market to lock in before mortgage rates rose further, bloating contract volume over the summer (and why month-over-month seasonal adjustments to this data are so very misleading).
• The surge in summer sales “poached” from future organic volume that we would have seen in September so we were already expecting a slow down in volume. Didn’t we learn in 2010 what happens when unusual circumstances press volume sharply higher only to see volume fall sharply when that circumstance disappears?

Weaker conditions prevail, but its really not as bad a report result as being discussed – namely because the seasonal adjustments paint a weaker picture than what actually happened, and we expected a decline in activity because the prior several months were artificially pushed higher with so many more buyers rushing to the market to beat rising rates (or the perception of rising rates).

Tags: Seasonality, Pending Home Sale Index, Seasonal Adjustment, PHSI, NAR, National Association of Realtors

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Had a fun interview with Tom and Sara this morning on the always MUST watch/listen Bloomberg Surveillance. We talked housing, rentals, vacancy and inventory. An added bonus was the addition of Adam Davidson – co-founder and co-host of Planet Money as guest anchor. I’m a huge fan of his show. Even bought their t-shirt last week through Kickstarter.

More importantly, I’m still the mayor of the Bloomberg Cafeteria on FourSquare.

Tags: Tom Keene, Sara Eisen, Bloomberg TV, Bloomberg Surveillance

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[click to open report]

Where we’ve been

Knight Frank’s Global House Price Index is published quarterly and tracks the performance of mainstream national housing markets around the world. They use Case Shiller results for the US market.

Europe at bottom:

With the Eurozone now in its second recession in three years buyer confidence is at an all-time low and it is no coincidence that all the bottom 12 rankings are occupied by European countries this quarter.

The top performers:

But it’s not all bad news. Six markets recorded double-digit annual price growth in the year to September; Brazil, Hong Kong, Turkey, Russia, Colombia and Austria.

Where we’re going

[click to open report]

I help provide their Manhattan and Miami insights and they liked the way I characterize the state of luxury housing as a “safe-haven” and the “new international currency.” Here are the top line observations in their Q4 12 Prime Global Forecast:

• In 2013, we expect prime residential prices across the 14 cities included in our forecast to rise by 2.5% on average, with Moscow, Miami and Dubai being the strongest performers.
• A sharp slowdown in the global economy is the highest risk for the world’s prime residential markets closely followed by government cooling measures.
• However, the current economic uncertainty is also considered a key driver of demand in prime cities as HNWIs seek the shelter of ‘safe-haven’ investments.
• Supply, or the lack of it, will be a key determinant of price performance in cities such as New York, Moscow and Miami in 2013.
• We envisage that government-imposed regulatory measures will keep a lid on price growth in Asia in 2013 but the west-east shift in the economic balance of power suggests more promising prospects in the medium term.

Q3 12 Global House Price Index [Knight Frank]
Q4 12 Prime Global Forecast [Knight Frank]

Tags: Europe, Case-Shiller, Brazil

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[click to open WSJ article]

As a followup to my analysis of light on property values, I came across this fun way to look at the market.

…real-estate consulting firm Knight Frank looked at 14 warm-weather vacation spots around the world. Using the average hours of sunlight per day and the average house price for a four-bedroom property in a prime real-estate location, Knight Frank arrived at the price for an hour of sunshine, averaged over a year…

Of course this is merely another way to slice and dice the high end housing market – just like the stock market – not scientific or useful but still fascinating – Florida looks like a pretty good deal.

Knight Frank Sunshine Index [WSJ]

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Knight Frank released their new report exploring the floor level premium in London’s high-rise residential developments with the coolest report name ever: Knight Frank Tall Towers Report 2012

While NYC has a taller residential housing stock than London but the premium per floor is similar. London shows a 1.5% increase in value per floor. My rule of thumb for Manhattan has been 1% to 1.5%, but closer to 1%. However we treat floor level as a different amenity than view and that’s probably the reason for the slightly larger adjustment in London. What’s particularly of interest is how much more the per floor cost of development is for higher floors:

Net to gross area ratios in tower schemes are lower, since the percentage of space taken up by the cores and service provision areas are comparatively high. This means that the effective revenue-generating 43% Uplift in construction costs per sq ft between the 10th and 50th floor.

I’ve explored the subject myself in New York Magazine and The Real Deal Magazine.

Tall Towers Report 2012 [Knight Frank]
Manhattan Values By Floor Level [Matrix/New York Magazine]
The cost of a view [The Real Deal]

Tags: The Real Deal, New York Magazine, London

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[click to open report]

Our friends across the pond at Knight Frank just released their Q3 2012 Prime Global Cities Index which our firm and Douglas Elliman in NYC and Miami contribute content to.

Miami was #3 after Dubai although that placement was exagerated by the drop in distressed sales in south Florida (and they will rise going forward). Still, Miami has come a long way in 2 years. Manhattan showed decline but most of that was attributable to the shift in mix to entry level sales as mortgage rates continue to fall to new record lows. However it’s quite interesting to look at Manhattan as more mundane a market than the super-luxury segment would suggest. Further proof that the top end is not a proxy for everything else.

Cities such as Dubai, Miami, Nairobi and London are increasingly considered investment hubs for HNWIs in their wider regions. In the wake of the Arab Spring, Dubai has been seen as a relative safe haven for MENA buyers while Venezuelan and Brazilian investors have looked to Miami to limit their exposure to domestic political and economic volatility.

HNWI = High Net Worth Individual

Here’s KF’s top line overview:

-Fifteen of the 26 cities tracked by the Prime Global Cities Index (58%) recorded flat or positive price growth in the year to September, but over the last quarter 20 of the 26 cities (77%) have seen flat or positive growth – indicating an improving scenario.
-The index now stands 18.7% above its financial crisis low in Q2 2009 with Hong Kong, London and Beijing having been the strongest performers over this period, recording price growth of 52.9%, 45.4% and 39.5% respectively.
-Five cities recorded double-digit price growth in the year to September; Jakarta, Dubai, Miami, Nairobi and London – a city from each of the five key world regions.

Q3 2012 Prime Global Cities Index [Knight Frank]
The Elliman Report: 3Q 2012 Manhattan Sales [Prudential Douglas Elliman]
The Elliman Report: 3Q 2012 Miami Sales [Douglas Elliman]

Tags: Prime Global Cities Index, London, Brazil

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