The latest Knight Frank Prime Cities Forecast shows luxury prices for the major cities in the world are expected to slow down by nearly half in 2016. From 4 percent to 1.7 percent, a CNBC report disclosed.
The forecast explains that China's economic slowdown is mainly to blame, plus the rising rates in the US as well as a slow down in other major markets are also factors.
Knight Frank said that the "prime" or "luxury" real estate market comprises the most expensive 5 percent of properties found in each city.
Liam Bailey, global head of research for Knight Frank said, "We're moving into a different environment where you won't see the level of wealth creation in China that you've seen in recent years."
Reports also revealed that economic slowdown in China will also hit the domestic housing market along with markets in Asia as favoured by wealthy Chinese buyers. Shanghai real estate markets are expected to fall by more than half, from 10 percent in 2015 to 4 percent in 2016. Hong Kong will fall by 5 percent, making it the poorest performing real estate market, while Singapore prices are expected to fall 3.3 percent this year.
Sydney, Australia, the top global luxury market in 2015, is once again expected to top despite the large number of Chinese buyers in the area. Prices will grow by 10 percent in 2016, slower than 15 percent growth in 2015, but still the best.
Along with Australia, the US is also likely to benefit. New York is expected to see prices go up 5 percent this year while Miami will see increase of 2 percent. However, one question remains, whether these US gains will continue with the potential for higher interest rates plus a rejuvenated dollar making real estate more expensive for overseas buyers.
