The latter end of 2022 has seen a transition in the world’s high-end property markets. With the rise in interest rates, the surge in house prices appears to be on track for a slowdown. As a result, analysts expect a shift from a seller’s to a buyer’s market in most prime real estate in 2023. However, most also agree that this sector isn’t facing another financial crisis next year.
Slower price rises
The latest Knight Frank forecast for prime real estate in 2023 predicts a slowdown in price rises. The consultancy firm has just revised its initial figure downwards and now expects luxury property to go up by 2% instead of the previous 2.7%.
Higher mortgage payments on the back of rising interest rates have affected buyers across the globe. While the prime real estate sector suffers less from the effects of more expensive borrowing, the niche is not immune. Consequently, “the transition from a seller’s to a buyer’s market is already underway across most prime markets,” says Knight Frank.
But values still rising in 2023
However, the report points out that prices are currently well ahead of their pre-pandemic levels. In fact, values for prime real estate would need to plummet by up to 40% in some cities to return to 2019 prices.
And despite the lower figures, Knight Frank predicts that growth in the world’s prime residential markets will be higher in 2023 than in six of the last ten years. Of the 25 cities that make up the index, 15 are still expected to register price increases next year.
Dubai hottest prime real estate in 2023
The report believes that luxury markets combining “safe haven capital flight” and low inventory levels will see less price fluctuation during 2023. Dubai sits at the top of the table for the biggest price hikes next year, with a 13.5% uptick. The index reports that this double-digit growth is “a more sustainable rate” than seen over the last two years.
Miami and Los Angeles prime picks
The index forecasts a rise of 5% in Miami, the second city in the table, and 4% in Los Angeles, in third place. However, it points out that forecasted growth has slowed since the summer because of higher mortgage rates and the fear of recession in the US. In addition, Los Angeles is considering levying a Mansion Tax on properties valued in excess of US$15 million.
Europe hot for prime property in 2023
European capitals dominate the top 10 listings, taking six positions. They include Dublin, Lisbon, Madrid and Paris, all in joint third place, with a forecasted 4% rise in prices. The index earmarks all four as recipients of “safe haven capital flight”.
The other end of the table
At the other extreme, London and Seoul occupy the last two places in the table. Prime real estate in both cities is expected to experience a price drop of 3% during 2023. However, the report highlights that in London’s case, prices will still be higher than in December 2021 because of a 3.5% increase this year.
(Source: Knight Frank)