Prices got too high and economic conditions changed, said Thomas Veraguth, the Zurich-based head of global real estate strategy for UBS Wealth Management. Waves of Middle Eastern and Russian buyers pulled back, for example, after the oil crash in 2014, he said.
“It’s fatigue,” Veraguth said. “Even the richest will say, ’I’m not going to pay that price anymore.”
Markets are shifting based on local conditions, said Kate Everett-Allen, a partner at Knight Frank in London. The U.S. election may cause buyers to pause in New York while the stability of the Swiss franc will continue to drive demand in Zurich and Geneva, she said.
Moscow had the biggest price increase in Knight Frank’s study, rising 11%. With Russia under international sanctions after its annexation of Crimea, and anti-money laundering measures tightened in London and other cities favored by that country’s elite, many opt to buy property at home. Developers also completed a number of luxury properties in the Russian capital, increasing supply.
Rich Russians
Russia has plenty of rich people. There are at least 189,500 ultra-high net worth individuals in the country controlling about $1.1 trillion, according to Capgemini estimates. It’s also incredibly unequal. There are 23 Russians on the Bloomberg Billionaires Index, a ranking of the world’s 500 wealthiest people, worth about a combined $271 billion.
In total, there are more than 100 Russians with more than $1 billion.
Chinese buyers have slowed overseas purchases, in part because of government restrictions on getting money out. And buyers everywhere are dodging risk, skipping Hong Kong, the world’s most expensive market and one now with political unrest, in favor of Taipei, which saw an 8.9% price increase in the third quarter.
While Brexit and taxes on second home buyers make London riskier and more expensive, buyers bid up prices by 10% in Frankfurt, which is a banking capital with relatively affordable prices.
When things go sideways around the globe, the U.S. has traditionally served as an island of safety and security, particularly for the world’s wealthy.