Prime property prices in the city's luxury residential market are expected to jump this year, according to a new report.

Sydney is set to dominate prime residential price growth in 2016 with a 10 per cent year-on-year rise, according to Knight Frank.

However, the pace of price growth in the Australian city is expected to ease from 15 per cent year-on-year in 2015, noted Kate Everett-Allen, Knight Frank partner, residential research.

“Australia’s economic slowdown, weaker stock market performance in recent months and the introduction of foreign investment fees explain the lower rate of growth in 2016,” Everett-Allen said.

“Only London, Paris, Geneva and Singapore are forecast to see stronger price growth – or a slower rate of decline in 2016 than 2015.”

Price growth in London is forecast to creep up marginally from 1 per cent to 2 per cent, according to the analysis of 10 prime residential cities worldwide. This was attributed to higher transaction costs, as well as political risk around the mayoral election and continued affordability concerns (the city is due to elect a new mayor in May 2016).

The recent terrorist attack in Paris was flagged as a likely dampener on buyer sentiment in the French capital, where the rate of price decline is expected to slow from -5 per cent last year to -3 per cent in 2016.

Meanwhile, in Geneva, high stock levels will keep prices from rising over the next 12 to 18 months and the city should see 0 per cent growth this year as “more stable” trading conditions take shape, according to Knight Frank.

As for Asia, Hong Kong is set to overtake Singapore as the weakest performing luxury residential market in 2016 as prime prices soften at the hands of a wave of new developments and a stronger HK dollar. The Singaporean market is expected to see a small decrease in price falls, from -3.5 per cent in 2015 to -3.3 per cent this year. 

In New York, growth is predicted at 5 per cent – similar to that of 2015, when demand for the city's luxury homes simmered thanks to the strength of the US dollar and weaker economic conditions worldwide.

“The Fed’s recent rate rise and the impact of geopolitical tension on the world’s top cities are currently considered the highest risk to the luxury city markets,” said Everett-Allen.

Emerging markets and the risk of potential deflationary cycles now represent the major headwinds for the global economy, she added.