The prices of luxury homes dropped in the first three months of 2013 despite the global economy picking up.
On average, the cost of plush homes fell 0.4% worldwide – with European cities in the throes of economic turmoil performing worst with an average 2.3% decrease.
European cities performed so badly that they sit in seven of the bottom 10 places in the latest Prime Global Cities Index from international property consultants Knight Frank, while the top half is dominated by cities in North America, the Middle East and the Asia Pacific.
However, even though prices have dipped, the index reveals that the average luxury property has appreciated in value by around 21% since early 2009.
The index tracks prices in 29 cities around the world and the average increase in value in the year to March 2013 has been 3.6%.
Jakarta luxury home values up 38%
The best performing location is Jakarta, Indonesia, which saw prices rocket by 38%.
The city was closely followed by Bangkok, Thailand, where prices surged by 26%, and Miami, Florida, where prices rose by 21%.
Property markets in Jakarta and Bangkok are overheating to the point where the governments have introduced cooling measures as their quickly growing middle classes pump their new-found wealth into property, forcing prime prices to even higher levels.
Prime real estate in Miami is picking up in price as wealth from Latin America, particularly from Venezuela, Brazil and Argentina, flows into the States.
The index reveals that the worst performing city is Tokyo, Japan, which has seen prime residential prices fall by 17.9% during the past year.
Tokyo slump is no surprise
The news holds no surprise for many property investors as the country has suffered nearly 15 years of deflation, although the Bank of Japan has recently announced monetary easing measures which are already improving business sentiment and an uptake in prime property prices.
The opposite is happening across the Asia Pacific region, with the governments in Malaysia and Singapore, as well as Hong Kong and China, facing challenges to restrain growth in property prices.
In each of these locations, recently introduced measures such as lending restrictions, new taxes and other regulations are now being tightened in a bid to dampen price increases.
Knight Frank flag that since their index was introduced in 2009, the weakest growth rate is always reported in the first quarter and prices grow stronger as the year progresses.
The firm says that the world’s rich are looking to shelter their assets in luxury properties because they are wary of the fragile recovery of the global economy and continuing financial upheaval in the Eurozone.