- According to Knight Frank, even the most successful luxury real estate markets are expected to experience a slowdown in the coming year due to rising interest rates and economic downturns.
- Across the 25 cities, Knight Frank anticipates an average price increase of 2% in 2023, which is lower than the 2.7% projection made by the company six months ago.
- This revision suggests that wealthy individuals, who are typically less affected by inflation and economic slowdowns, may be delaying major real estate purchases or being more selective with their prices due to the increase in interest rates.
According to a recent report, Dubai and Miami are expected to be the top luxury real estate markets for investors in the coming year.
Dubai topped the list of 25 prime markets, with a projected 13.5% price increase in 2023, as forecast by real estate consultancy Knight Frank. Miami came in second place, with a 5% price increase expected. Other markets that are expected to see moderate growth include Dublin, Lisbon, and Los Angeles, with 4% expected increases.
On the other hand, Seoul and London are expected to be the weakest performers, with 3% price drops anticipated. New York falls in the middle of the pack, with an expected 2% price increase.
Despite strong performance in some luxury real estate markets, overall growth is expected to slow in the coming year due to rising interest rates and economic downturn, according to Knight Frank. The company has revised its projection for average price increases across the 25 cities to 2% in 2023, down from the 2.7% forecasted six months ago.
This indicates that wealthy individuals, who are typically less affected by inflation and economic slowdowns, may be becoming more cautious in their real estate purchases or more selective in terms of price due to the increase in interest rates.
“Although prime markets are more insulated to the fallout from higher mortgage costs, they’re not immune,” the report said. “The transition from a seller’s to a buyer’s market is already underway across most prime residential markets.”
Dubai's luxury real estate market experienced a significant price increase of 50% in 2022, but the projected 13.5% price increase for 2023 represents a slower rate of growth. The city has attracted a large number of wealthy residents in recent years, with Russians being a significant contributor due to their desire to secure a safe place to invest their wealth, including purchasing yachts and real estate, amid Western sanctions related to the conflict in Ukraine. Single-family home prices in Dubai rose by 13% in October, and overall sales volume increased by 73% compared to the previous year.
Miami continues to be a popular destination for the wealthy due to its low tax rates and the increasing number of financial companies establishing their headquarters or offices in South Florida. While New York is anticipated to see a 2% price increase in the coming year, which is lower than in 2022, many brokers predict a decline in prices, particularly in Manhattan. However, Knight Frank believes that New York will still benefit from foreign buyers seeking more exposure to the US dollar as the Federal Reserve raises interest rates.
According to the report, Singapore is the only Asian city in the top 10 and one of only four cities whose forecast has improved in the past six months. This is due in part to wealthy Chinese citizens moving their money and families to Singapore to escape strict Covid lockdowns and a slowing economy in China. Knight Frank notes that buyers who are willing to pay in cash will be more attractive to sellers in all 25 markets, as cash is king. Additionally, political and economic instability in many countries is shifting towards safer real estate investments, causing buyers to seek out mature and transparent luxury markets.
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