Miami, Moscow, and Dubai will be the world’s best-performing markets in 2013.

Despite continued economic uncertainty, Knight Frank predicts that 2013 will be a year of continued growth in many major cities around the world.

The world’s luxury markets have come full circle since the fall of Lehman Brothers. Luxury prices fell as market optimism waned during the global slowdown, but within a year, main markets like London, Hong Kong, and Shanghai were rallying again, with prime quarterly price growth of 5.5 percent, 5.6 percent, and 9.8 percent, respectively. buy property in qatar

The Prime Global Cities Index was created by Knight Frank in 2006 to monitor the performance of luxury housing markets in some of the world’s most important cities. The index is now 18.7% higher than its financial crisis low from Q2 2009. The pace at which the index re-bound is impressive; by Q1 2010, it had recovered its pre-crisis peak.

Highlights for 2013 include: Expect prime residential prices to rise 2.5 percent on average across the 14 cities included in our forecast in 2013, with Miami, Moscow, and Dubai leading the way.

The most serious threat to the world’s most prestigious residential markets is a sharp recession in the global economy, closely accompanied by government cooling measures.

However, as HNWIs seek the safety of’safe-haven’ investments, the current economic instability is seen as a key driver of demand in prime cities.

In cities like New York, Moscow, and Miami, supply, or the lack thereof, will be a primary determinant of price success in 2013.

Price growth in Asia will be restrained in 2013 due to government-imposed regulatory steps, but the west-east change in the economic balance of power indicates more promising prospects in the medium term.

Prime real estate has not only weathered the storm and outperformed its conventional counterparts; it has thrived as a result of the volatile economic environment. The long-running Eurozone debt crisis, global tensions surrounding the Arab Spring, and the lack of alternative high-performing asset classes have all contributed to its popularity.

Low interest rates, the desire among HNWIs for open and transparent markets, and the enormous scale of wealth creation that was simultaneously occurring in the world’s emerging economies all contributed to the rapid transformation from “crisis” to “safe haven.”

The number of centamillionaires (those with $100 million or more in disposable assets) rose by 29% globally between 2006 and 2011. Over the same time span, the number of centa-millionaires in Latin America, Southeast Asia, and South-Central Asia increased by 67 percent, 80 percent, and 200 percent, respectively.

HNWIs in these emerging markets have looked outside their national borders for double-digit annual returns, resulting in a substantial increase in cross-border investment flows. For wealthy Brazilian, Venezuelan, and Argentinean buyers, Miami has delivered, while a growing number of Indian and Iranian HNWIs are flocking to Dubai.

What will be the hottest topics in 2013?

We predicted three global developments that would have a growing effect on the world’s luxury residential markets in Knight Frank’s 2012 Forecast: wealth formation, the growth of’safe-haven’ investments, and the widening gap between East and West.

In 2013, Knight Frank expects the same patterns to continue, but currency fluctuations to have a greater impact on the transfer of capital from city to city. Prime prices in New York have dropped 2.6 percent since 2008, but when currency fluctuations are factored in, Chinese buyers get a 17.6 percent discount.

The quest for one-of-a-kind “trophy” homes will pick up steam in 2013, owing to the rising quality of new construction. Tall towers in major gateway cities are already attracting the interest of a growing number of HNWIs, and this trend is expected to continue.

The world’s wealthy will continue to micro-manage their property holdings in the coming year, balancing lifestyle gains against tax benefits and currency fluctuations, but price efficiency, both historic and expected, will be key to most decisions.

The prognosis

Unless the euro collapses, the US falls off its fiscal cliff, or Asian protectionism rises, the outlook for luxury homes in the world’s major cities is one of cautious optimism.

The Knight Frank forecasts shown in the map below reflect our expectations for prime price growth in 2013; we’ve also included each city’s actual price output from September 2012 for comparison. We anticipate a 2.5 percent increase in prime prices across the 14 cities surveyed in 2013. In 2012, we forecasted a 0.6 percent increase in average price rise.

In eleven of the 14 cities included in our forecast, we expect prices to rise or stay flat in 2013. Due to tight prime supply and the planned release of a range of superprime initiatives, Moscow is expected to have the highest price growth of all 14 cities (we forecast annual growth of 10%).

Another good news story comes from Dubai, where we expect luxury villa prices to grow by 5% to 10% in 2013. Professionals relocating from the UK and Asia are making more inquiries, but the availability of high-quality family homes remains largely unchanged.

Just three cities — Paris, Geneva, and Shanghai — are projected to see price drops, each by less than 5%.

In Paris, the market has been sluggish in the second half of 2012, but once President Hollande’s austerity steps have taken hold, we expect greater clarity in 2013. Despite political dampening steps, new development is still restricted in markets such as Paris, which may aid sales absorptions.

In 2012, international demand in Geneva fluctuated, and new lending laws impacted borrowing capacity.

In Shanghai, however, the limitations on home purchases that went into effect this year are expected to continue. This includes prohibiting non-resident singles from purchasing property in the area.

Supply constraints are likely to be a deciding factor for some cities in 2013. Price growth is projected to be aided by a scarcity of high-end homes in Moscow and Miami. However, while there is a shortage of luxury homes in Monaco and New York, there is not enough of a deficit to push prices dramatically higher in 2013.

Forecasts for the mainstream housing market are arguably more straightforward than those for the prime market. It is possible to determine levels of affordability by examining key metrics such as house prices to income ratios, house prices to rent ratios, interest rates, and disposable incomes. The prime business, on the other hand, follows a different set of rules.

Instead, non-quantifiable factors like lifestyle, market confidence, and the ease with which HNWIs can exit a market are often taken into account. The current situation in Asia, where markets are increasingly regulated by governments, makes it difficult to get a true picture of a prime market’s growth potential.

Risk assessment

Although the projections we’ve outlined reflect what we consider to be the most probable outcome for 2013, there are a number of possible stumbling blocks that could throw our predictions off track.

With no end in sight to the Eurozone’s continuing crisis, it’s no wonder that global and domestic economic factors continue to pose the greatest threat to property prices in 2013.

While the slowing global economy is the biggest danger in places like Geneva, Monaco, Dubai, and Hong Kong, there are more insular worries about the health of domestic economies in places like Kuala Lumpur, Mumbai, Ho Chi Minh City, and Sydney.

Government involvement is becoming more relevant in both mature real estate markets, such as London and Paris, and rapidly developing ones, such as Singapore, where the government recently tightened immigration policies and imposed home loan restrictions. The key cooling steps are ranked in terms of the degree of danger they pose in Figure 4.

Additional regulatory controls in top cities around the world, such as a 15% additional stamp tax for foreign buyers in Hong Kong and a stamp duty rise for homes worth more than £2 million in the UK, may have an impact at the very top end of the market.

Interestingly, despite their proximity to the problem and wider concerns about the global economy’s health, none of the European cities polled ranked the Eurozone crisis as the highest risk, lending credence to the notion that prime locations have benefited from their’safe haven’ status and continue to attract investment despite sovereign debt concerns and geopolitical uncertainty.

However, even at the luxury end of the market, a lack of available financing, shrinking job markets, and low consumer trust in the region could dampen demand.

Interest rates, high inflation, low household income growth, and the implementation of large-scale housebuilding programs are all considered low risks by Knight Frank for the majority of locations.

Aside from the key threats discussed above, there are a slew of other variables that could alter demand and supply trends in the world’s top markets, including currency volatility, tax reforms, and revisions to planning laws. However, the dynamics are unlikely to change; luxury housing supply is limited in most cities, and global demand is increasing at an unprecedented rate.