Cities show staying power as London Fashion Week returns

Demand for city living is proving resilient as global property markets slow in the face of affordability challenges and weaker economic activity.

The average house price across 150 cities worldwide increased by 5.6% in the year to December 2022. This was down from a peak of 11.6% in April 2022, according to analysis of mainstream market data by Knight Frank.

With London Fashion Week taking place from 17 February, price growth in the English capital trails New York but is ahead of Milan and Paris.

New York once again showed a clean pair of heels to its fashion rivals with annual growth of 8.1% in November.

London, which in zone 1 is now operating largely as it was before the pandemic, was second to the Big Apple with annual growth of 6.4% in the same period.

Milan was third with annual growth of 5.1% to January 2023. Paris, which is proving popular with Middle Eastern prime property buyers who are experiencing a currency discount, recorded an increase of 2.4% in the 12-months to September.

Cities initially underperformed suburban and rural markets during the pandemic as people looked for more space and greenery.

However, 2022 saw a resurgence as lockdown restrictions around the globe were lifted and buyers recognised the value of cities as they reopened to workers, tourists and students.

Concerns about surging rates of inflation have seen central banks embark on an aggressive sequence of rate rises, which we explore here. This has created a new monetary environment that has stretched affordability and initiated a period of adjustment amongst buyers.

“Buyer sentiment has weakened across key global cities as mortgage costs have surged and the energy crisis has led to spiralling household bills.

“But annual price growth remains in positive territory across the major fashion capitals with sales volumes taking the biggest hit,” said Kate Everett-Allen, head of global residential research at Knight Frank.

Our latest sentiment survey found more half of buyers (55%) were looking to purchase a home in an urban location, with city the single most popular urban option as the first choice for 22% of respondents. In May 2020, just 9% of respondents were looking to purchase a home in a city.

Images by Roy Stephen from Pixabay