Luxury real estate continues to be an attractive category for investors, despite the general decline in the rate of price growth on the market. Recent report The Prime Global Cities Index, published by Knight Frank, sheds light on trends in the second quarter of 2024, noting that average annual price growth for luxury properties in the world's 44 largest cities slowed to 2.6%. However, in a number of megacities, the cost of premium housing continues to grow at a significant pace. Let's consider cities where the demand for luxury real estate is especially high and where the price for this segment continues to steadily increase.
Leaders in price growth for luxury housing
Despite general economic fluctuations, some cities are experiencing a steady and dynamic increase in prices for luxury apartments and houses. Below are the cities where luxury real estate is showing the fastest growth rates:
- 🇵🇭 Manila, Philippines: +26%
The capital of the Philippines, Manila, tops the list of leaders in price growth. Economic development, coupled with growing investor interest in the Asian market, has meant that demand for luxury housing here has increased significantly. Active development of infrastructure and the influx of international companies also play a significant role in increasing prices.
- 🇮🇳 Mumbai, India: +13%
Mumbai is the financial center of India and one of the most populous cities in the world. High demand for luxury properties among Indian and international investors is driving up prices for premium apartments and houses. Continuous development of residential and business areas, as well as demand among affluent Indians, keeps the growth rate high.
- 🇮🇳 Delhi, India: +10.6%
Another Indian city, Delhi, is also showing rising prices for luxury housing. The stable economic situation and interest in prestigious areas in the capital create an active market for premium real estate. Attention to luxury projects among foreign investors is also pushing prices up.
- 🇺🇸 Los Angeles, USA: +8.9%
Known for its rich culture and cinematic fame, Los Angeles remains a magnet for luxury homebuyers. There is a high demand for luxury mansions and apartments here, especially among celebrities and wealthy individuals. The city's investment attractiveness is facilitated by its high standard of living and status as a cultural center.
- 🇺🇸 Miami, USA: +7.1%
Miami continues to attract buyers and investors from around the world due to its mild climate, beautiful beaches and favorable tax conditions. These factors make the city extremely tempting for investment in luxury real estate. High demand for housing in prestigious areas is driving up prices.
Outsiders of the luxury housing market
While some cities are experiencing significant price increases, others are experiencing the opposite trend, with luxury properties losing value. Here are the cities where luxury housing prices are falling:
- 🇳🇿 Wellington, New Zealand: -5.9%
Wellington tops the list of outsiders. Reasons for lower prices may include limited economic activity and less attractiveness to international investors.
- 🇹🇭 Bangkok, Thailand: -3.9%
In Bangkok, there is a decline in interest in premium housing, which may be due to economic instability and low demand among foreigners.
- 🇦🇹 Vienna, Austria: -3.2%
Viena, despite its high standard of living, also shows a decline in prices for luxury housing. Domestic economic factors and weak interest from international buyers play a role here.
Rent for luxury real estate
Luxury property rentals have seen strong growth in recent years, especially in major metropolitan areas and cities popular with expats. According to an international consulting company Savills, in the first half of 2024, the cost of renting premium housing in 30 major cities around the world increased by 2.2% . The main reason is the growing demand for rentals from foreign citizens and the high interest in prestigious properties, which is fueled by a number of factors, including interest rates and limited supply in the market.
The stable growth in rental rates for luxury housing in many cities around the world is associated with a number of reasons, among which several key factors stand out:
- Rising interest rates. Rising interest rates in many countries are making buying property less affordable and more people are choosing to rent. This is creating increased demand, especially for upscale housing, as wealthy renters choose prestigious properties in major cities.
- Demand from foreign citizens. Foreign investors and expats are actively renting luxury housing, maintaining high levels of demand in popular destinations. Cities such as Dubai, Bangkok and Lisbon are particularly attractive to expats due to their favorable climate, stable economy and strong cultural appeal.
Largest rent increase
According to Savills, the largest increase in rental rates in the first half of 2024 was recorded in the following cities:
- Dubai (+12.1%) – Dubai’s popularity among foreigners is due to its favorable tax conditions and high standard of living;
- Bangkok (+9%) - the capital of Thailand attracts international tenants due to its relatively low living costs and favorable climate;
- Lisbon (+7.5%) – Lisbon offers a unique combination of historic architecture, a mild climate and a thriving economy, making it popular for luxury rental housing.
In cities such as Athens, Barcelona, Amsterdam and Berlin, rents for luxury properties also continue to rise. Here, the growth in rates was more than 3%, which makes them attractive to wealthy tenants who are looking for prestigious housing in a comfortable and stable environment.
Experts predict that in the coming months, rental rates for luxury housing will continue to grow faster than prices for purchasing real estate. This is due to limited supply and high interest rates, which makes renting a more attractive alternative for wealthy citizens who prefer to live in prestigious areas, but are not ready to buy a home. Stable growth in rental rates and interest in luxury real estate from foreign tenants make the premium segment desirable for investment.