Covid-19 has had a profound impact on many aspects of people’s lives. The changes to people’s lifestyles and working habits have led some to reassess the space they occupy and how it will look in the future. While the longer-term trends are still developing, the immediate impact of the pandemic on prime residential values in cities around the world has resulted in a fall of 0.5% for capital values and 1.1% for rental values.

Capital values

Global uncertainty had been weighing on prime residential markets in 2019, with modest falls of 0.3% recorded in the six months to December 2019. Combined, the annual average price movement turned negative for the first time since 2009, down 0.8% for the year to June 2020.

The markets which have held up best in the first half of 2020 are generally characterised by higher levels of domestic demand and tight supply. These factors are particularly prevalent in a number of European cities in our index resulting in a positive average price movement of 0.4% for the region over the first six months of the year. By contrast, prices on average fell by 0.6% and 1.5% in Asia Pacific and North America respectively over the same period.

Rental values

The prime rental markets, which typically have a higher share of international and corporate tenants, have suffered as demand has dropped off as a result of the pandemic. While owners may hold onto their properties during a crisis if they do not need to sell, landlords are more likely to lower rental values in order to keep their property occupied, in turn realising price falls. As a result, average prime rental values for the cities in our index fell by 1.1.% in the six months to June 2020, against the 0.5% fall seen in capital values.

Houses outperform

We are already seeing the start of the longer term impacts of Covid-19 reflected in price movements across our global index. Apartments experienced average capital values falls of -0.7% over the first half of 2020, while houses, which are on average over twice the size of the apartments in the same city, maintained a positive growth of 0.3%.

Looking ahead

Prime residential city markets tend to prove more resilient than the wider mainstream market, although much still depends on the economic situation which is just materialising in a lot of cities. However, this is not a financial crisis as in 2008 where many property owners were highly leveraged. Few sellers are therefore being forced to sell and may choose to wait to sell rather than lowering the price.

Savills Residential Global Market Survey* (see below), a survey of experts across the Savills global residential network, found that 46% of respondents expect to see slight price falls in the second half of 2020, compared to just 5% who anticipate price rises. Looking to 2021 and beyond, respondents are positive about prices. Nearly half of all respondents anticipate price increases in 2021, and 70% expect price increases in 2022. For more details on our forecasts for individual cities, see Global cities outlook.

_{^{* Savills Global Residential Sentiment Survey is designed to take the pulse of residential property markets worldwide. The findings provide a snapshot of current market conditions and future trends based on an internal survey of 41 experts across the Savills global residential network. The results displayed are an aggregate of all replies, unless otherwise stated.}}

_{^{The survey was conducted from 27th May to 2nd June 2020. Responses come from markets within the following countries: Antigua, Austria, Australia, Bahrain, Barbados, Cayman Islands, China, Croatia, Czech Republic, Egypt, England, France, Gibraltar, Italy, Monaco, Montenegro, Portugal, South Africa, Spain, Switzerland, Thailand, The Turks and Caicos Islands, United Arab Emirates.}}

_{Read the articles within Savills Prime Index: World Cities below.}