Luxury homes continued to become more expensive in 85 cities in the world in 2022. This is according to Knight Frank, which reveals that it was in Dubai where prices of luxury homes rose more in 2022 compared to the previous year (44.2%). This ranking, which brings together the prices of luxury homes in 100 cities and tourist areas in the world, also shows that in the Algarve luxury homes were 15.3% more expensive compared to the previous year. In Porto, prices rose 12.7% and in Lisbon 6%.
These data were determined by the Prime International Residential Index (PIRI 100) of Knight Frank, which evaluated the evolution of prices of luxury homes in 100 cities and ski and sun zones around the world. It was precisely in Dubai, in the United Arab Emirates, where luxury homes were more expensive in 2022 compared to the previous year (+44.2%), thus consolidating its position as "world centre for individuals with assets over 30 million dollars" (about 28 million euros at the current exchange rate), highlights the consultancy.
Most of the cities and tourist areas analysed around the world - 85 out of 100 - saw the price of luxury homes rise between 2022 and the previous year. Among the largest increases in price, the survey highlights the following cities that complete the top 5:
- Aspen, in the US (+27.6%)
- Riyadh, in Saudi Arabia (+25%)
- Tokyo, Japan (+22.8%)
- Miami, USA (+21.6%).
Looking at the top 10 where the price of luxury homes rose most in 2022, two Portuguese locations stand out: the Algarve, where these 'prime' properties were 15.3% more expensive, is in seventh place; and Porto, where prices rose 12.7%, is in 10th place. Also according to the PIRI 100 ranking for 2022 - which was recently published in Knight Frank's Wealth Report 2023 - Lisbon was in 40th position, with the prices of luxury homes having risen by 6% compared to the previous year.
More cities are feeling luxury house prices fall
"The post-crisis boom in global property markets has fuelled soaring price growth over the past 12 months. But even luxury markets are not immune to the biggest interest rate swing in history," Liam Bailey, partner, global head of research at Knight Frank, stressed, quoted in a statement.
In addition to the less expressive growths not being uniform, as revealed by Knight Frank's analysis, "some luxury residential markets are feeling the effects of this change in the macroeconomic scenario more than others", they also highlight. This is because they counted 15 cities that saw luxury home prices fall in 2022, compared to 7 in 2021.
It was precisely the 'prime' residential markets that recorded the largest price rises during the pandemic, which are now experiencing the most significant property devaluations: Wellington (-24%), Auckland (-19%), Stockholm (-8%), Vancouver (-7%) and Seoul (-5%).
However, "the transition from a sellers' market to a buyers' market is underway and the shortage of luxury homes in several major cities, exacerbated by the pandemic, is driving down the prices of these luxury dwellings. With several economies reaching peak inflation - and therefore coming to the end of the monetary tightening cycle - all eyes will be on more resilient labour markets," Knight Frank further concludes in the document.
How will luxury house prices evolve in 2023?
The prime residential market is still considered safe in the eyes of investors. But Knight Frank admits that the market should decelerate in 2023, reflected in a cooling of demand and sales and also in the arrival of fewer luxury homes on the market. All these factors together should lead to a slowdown in the growth of luxury house prices.
Given the current macroeconomic context marked by the rise in reference interest rates by major central banks around the world, Liam Bailey warns that "price growth will decelerate in 2023, but markets will deflate rather than collapse - this is not 2008".
But how will the prices of luxury homes evolve in 2023? According to the consultancy's analysis of 25 cities around the world, prices are expected to rise by an average of 2% in 2023, a downward forecast from the 2.7% estimated in mid-2022. "The slowdown will be far from uniform. Some cities will see annual price growth move in single digits, while others will see prices fall," Knight Frank highlights in its report.
Still, 15 of the 25 cities analysed will feel luxury home prices rise in 2023. It is estimated that homes will be 13.5 percent more expensive in Dubai this year compared to 2022. Also in Miami (USA), Dublin (Ireland) and Lisbon, house prices are expected to rise by 4%. This is also the forecast of rising prices of luxury homes for Los Angeles, Madrid, Paris and Singapore, the report reveals.
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