“Dubai Leads Global Luxury Property Market Despite Rising Interest Rates
Despite rising interest rates causing challenges in the luxury property market, Dubai has emerged as a standout performer. The city saw an increase in the sales of homes priced at $10 million and above, recording the highest global sales volume of $1.5 billion in this category during the second quarter of this year.
According to the Global Super-Prime Intelligence report released by real estate consultancy Knight Frank, sales of residential properties valued above $10 million, known as super-prime estates, declined by 13% in the second quarter of 2023 compared to the same period the previous year across 12 key international markets.
The total value of luxury residential sales over the 12 months leading up to June fell to just under $30 billion in the surveyed markets. This represents a significant decrease from its 2021 value of $40.7 billion. However, it’s important to note that this year’s numbers still exceed pre-pandemic levels, which hit a low of $18.6 billion in 2019. The recent surge in interest rates, with a federal policy rate reaching 5.25%-5.50%, is contributing to the challenges in the luxury property market.
Dubai stands out as one of only four markets that experienced growth in the overall sales volume of high-end residential properties between the second quarters of 2022 and 2023, with a remarkable 79% increase. Other cities with growth include Sydney (46%), Paris (17%), and Geneva (7%). Dubai led the global market in the second quarter of 2023, achieving $1.582 billion in sales through 95 properties and recorded annual sales of 320 properties totaling $5.834 billion.
New York followed as the second-highest performer with $1.142 billion in sales from 67 properties, trailed by London with $1.034 billion from 54 sales and Hong Kong with $834 million from 42 sales. In total, there were 422 sales in the surveyed cities during the quarter.
Dubai’s rise in the luxury property market can be attributed to the influx of global wealth that has poured into the city in recent years. The United Arab Emirates, and Dubai in particular, has become a sought-after destination for wealthy expats and investors from various jurisdictions. Factors contributing to this trend include the attraction of crypto millionaires and affluent Russians seeking refuge from Western sanctions.
Moreover, the UAE, along with other Gulf states, maintained economic growth exceeding the global average in 2022, fueled by energy exports and economic stability amid the Russia-Ukraine conflict and the ongoing effects of the COVID-19 pandemic. This economic environment has made Dubai even more appealing to high-end homebuyers.
Looking ahead, Knight Frank’s Global Head of Research, Liam Bailey, anticipates a decrease in global trade volume in the luxury property market next year, as the super-prime real estate market retracts from recent highs. The main challenge in the near term is the supply shortage, as there were limited new development starts between 2020 and 2022. This scarcity of new inventory may lead to increased competition for available stock, which could support property prices.”