Where in the world would you buy property this year, assuming you were brave enough to invest at all?
As we enter the uncertain waters of the coming year, Europe remains, as international specialist Property Frontiers puts it, the 'one big area of unsettlement'. And, as Liam Bailey, Knight Frank head of residential research, concedes, these are indeed confounding times, even for experienced market analysts.
Buyer confidence may rest on the knife edge of the euro-zone debt crisis, but we don't build wealth by sitting on our hands. So, for those willing to add to their portfolios this year and with Europe on their minds, the fourth-quarter Prime Global Forecast for last year from Knight Frank offers some insights.
To begin, Bailey points to buyer behaviour since the 2008 economic crisis. As stimulus measures and low mortgage rates began to lure the rich back, they tended to focus on luxury real estate in prime markets, regarded as 'safe haven' assets. Post-2009, wealth portfolios began to recover, and demand for prime, or luxury, property rose across the world, he says.
Then came the next wave of Europe's debt woes, raising the question that Knight Frank asks, and that is whether prime property can be considered 'safe' any more? After all, in Europe - and North America - improving conditions in prime markets since 2009 have been set against a backdrop of weak housing markets, stuttering economies, and 'a deleveraging cycle which has generally pushed other asset prices lower'.
'This process highlights a key risk that prime markets will ultimately be undermined by domestic economic reality, with a convergence between prime and mainstream market performance,' Bailey says. 'If the euro was to collapse, or a similar catastrophe was to strike, all bets really would be off and we would expect much weaker performance across all of our prime markets.'