It’s that time of year when it’s a useful exercise to consider where the luxury property buying and investment trends are heading. It’s fascinating to see how certain places fall in and out of favour with investors and buyers; and where in the world remains perennially popular.
In its annual survey, property consultancy Knight Frank ranks Dubai the number one city for growth in 2023, with expected price hikes of some 13.5%.
While we saw a surge in property prices across the board in the pandemic years, there’s a global downward trend set to continue through 2023.
The luxury – or prime – residential property market is a little more immune to global issues like geopolitics, inflation and economics – but it’s certainly not immune. I predict a continuing shift from a seller’s to a buyer’s market this year.
Analysis from Knight Frank suggests prime prices would need to fall by an enormous 30 to 40% in some cities – such as Dubai – to return the pre-pandemic prices we saw in 2019. Overall, things look positive for 2023.
Every year, Knight Frank tracks the leading 25 cities for luxury property, and its current predictions suggests prime prices will rise by 2% this year – but despite something of a slowdown in price increases, aggregate growth in 2023 will still be greater than rates recorded in six of the last ten years across the prime residential markets that the consultancy tracks.
Pundits suggests that while Dubai tops the growth charts in the luxury sector, the slowed growth rate is more sustainable, certainly compared to the rapid growth rates we’ve witnessed over the last few years, as Dubai’s affordability, location, infrastructure, lifestyle and tax advantages came onto investor’s radars.
Next on the list are Miami and Los Angeles. But Knight Frank revised its forecast growth rate downwards in the past six months, on fears of recession, US fixed mortgage rates exceeding 7% and, in Los Angeles, news of a Mansion Tax being mooted on properties priced above US$5 million.
European cities remain high on the chart this year, taking six of the top ten rankings with Dublin, Lisbon, Madrid and Paris sharing joint third place with an expected growth rate of some 4%. With the dark clouds of recession gathering over the eurozone, safe haven capital flight seems likely to bolster these prime markets over the coming year.
What’s clear to me is that savvy investors are heading to safe havens – well-established trusted markets, and, as trust in asset classes like cryptocurrencies and stocks drops, property is a highly attractive asset. Volatility in certain asset classes is pushing buyers towards the more mature and transparent luxury markets.
Cash will also be king in 2023, as nervous sellers favour unleveraged buyers to speed up property sales. Efforts in the UAE to create greater market transparency will be mirrored in other markets too, as international policymakers increase their efforts to track property ownership, to improve transparency and accountability while maximising revenue.
Singapore, the only Asian city in the top ten (sharing the third spot with the European cities) is one of only four cities that made Knight Frank’s 2023 list with an upgraded growth forecast. Reasons for the upgrade include government efforts to attract more family offices and new visa measures. Singapore seems to be gaining a reputation as Asia’s regional wealth hub.
Singapore and Hong Kong are launching new visa rules to attract HNWIs and talented people, perhaps following the UAE’s lead – but this will undoubtedly lead to a growth in demand and price of prime property.
New York, at 13th rank, is expected to see 2% growth – a rate above prime price growth recorded in nine of the past ten years.
London and Seoul sit at the bottom of the rankings with prices forecast to drop by 3% in 2023. However, Knight Frank’s researchers suggest central London prime real estate will grow, and by the end of the year, will still be higher than figures we saw at the end of 2021.