A lack of homogeneity across continents, countries and even cities will characterize the global luxury property market next year, according to a new report from the research arm of estate agent Knight Frank.

A lack of homogeneity across continents, countries and even cities will characterize the global luxury property market next year, according to a new report from the research arm of estate agent Knight Frank.

For the first time, the agent’s annual forecasts of global high-end property values showed an equal number of cities expected to fall, as rise, in price. Some 44 per cent of the 29 cities ranked in the Global Forecast 2012 are predicted to fall, while the same number are tipped to rise. Twelve per cent are forecast to stay put.

Given the global economic turmoil it may seem surprising that the agent is forecasting prices rises in 44 per cent of the cities monitored. In many of these cities, the critical factor is a lack of quality new supply. Knight Frank expects this to be particularly evident in London, Paris, Moscow, Nairobi and Kuala Lumpur.

In those cities forecast to see price growth, this will be underpinned by the flow of capital from the world’s troubled regions and a desire amongst the wealthy to target property and other real assets over financial products, said Knight Frank.

Many of the cities which are dropping in value are being impacted by the eurozone crisis. This is considered a high risk for 60 per cent of the cities covered. Political and security issues present the greatest risk to the housing markets in the Middle East and Africa.

“There are three key themes which will determine the performance of prime city markets in the short- to medium-term; the scale of global wealth generation, the ongoing search for ‘safe-haven’ investments and the growing divide between the prime markets in the West and the rest of the world,” said Liam Bailey, head of research.

Asian cities make up a large part of the cities predicted to fall, mainly down to the government measures aimed at dampening speculative demand starting to take effect. More than 60 per cent of the Asian cities monitored are forecast to see price falls in 2012, as government measures aimed at dampening speculative demand start to take effect.

For example, the annual price growth of luxury homes in Hong Kong, Singapore and Shanghai now stands at 7.8 per cent, -6.8 per cent and 3.8 per cent respectively, down from 19.7 per cent, 15.8 per cent and 29.7 per cent a year earlier

“The slowdown in luxury price performance is most evident in Asia. Here, the flood of cheap money brought about by a surge in domestic wealth and stimulus measures in the US and Europe was followed by a wave of monetary tightening measures to squeeze inflation,” said Kate Everett-Allen in the international residential research team.

Despite the global nature of many of the economic threats facing world housing markets, it is the performance of the domestic economy and economic policy that are considered to present the greatest risk. The findings point to six cities in which the domestic economy is felt to pose the greatest risk to their prime housing markets.

Three of these cities are in Asia – Bangkok, Singapore and Beijing. In Bangkok the full impact of recent floods on the national economy has yet to be confirmed and has the potential to weaken the luxury market further. In Singapore and Beijing macro control policies are starting to stifle performance and could do so further in 2012, said Everett-Allen.