Global Luxury Property Investment Returns Tick Higher

Average annual price growth in prime global city markets ticked up in Q3 2023 to 2.1 per cent, well above the recent low of 0.2 per cent seen in Q1.

Knight Frank, which has produced the data, says the recovery in annual pricing confirms that global housing markets are displaying signs of stabilisation, despite sharply higher mortgage rates. 

However, while 67 per cent of markets saw prices rise over the year, only 63 per cent saw an increase over the quarter, indicating lingering uncertainty due to the potential for further interest rate hikes. 

The agency says ongoing uncertainty over inflation and interest rate risks continues to weigh on all levels of the global housing market, including the luxury segment, and is likely to limit price growth in the medium term. 

In detail, despite a modest 2.1 per cent price increase this quarter, Manila claimed the top spot with a 21.2 per cent annual rise in prices, attributed to strong domestic and foreign investments. Dubai, with 15.9 per cent annual growth, has moved into second position. Shanghai secures the third spot with 10.4 per cent annual growth in our rankings. 

The United States dominates the lower rankings of the index, with San Francisco experiencing a 9.7 per cent annual price decrease and New York a fall of 4.0 per cent. The trend for wealthy investors to target Florida continues, benefitting the Miami market, where demand has driven a 0.9 per cent annual price increase.

Knight Frank says London’s prices continue to decline, with a marginal 0.7 per cent drop in the quarter and a 1.7 per cent decrease annually. Despite the relative stability of prime markets this year, London prime prices are not immune to the impact of rising interest rates and broader economic and political uncertainty. These factors are expected to continue exerting pressure on prices in the short term. 

“The improvement in average annual house price growth will be welcomed by prime market homeowners but shouldn’t be overstated. Higher rates mean we have moved into a world of lower asset price growth - and investors will need to work harder to identify opportunities for outperformance to secure target returns” explains Liam Bailey, global head of research at Knight Frank.