According to Tahir Majithia, managing partner of Dubai-based real estate firm Prime Capital, the Palm Jumeirah beachfront residential villas in Dubai on February 24, 2022. Russians are consistently among the top 10 countries Leading investor in Dubai real estate.
Christopher Pike/Bloomberg via Getty Images
Wealthy investors betting on luxury real estate will do best by pouring their money into Dubai or Miami next year, according to a new report.
In the ranking of the world’s top 25 luxury or so-called “premium” real estate markets, Dubai tops the list, with prices expected to grow 13.5% by 2023, according to the investment firm. Knight Frank real estate consultant. Miami comes in second, with prices expected to rise 5%. Dublin, Lisbon and Los Angeles follow, with an expected increase of 4%.
The worst performing places next year are expected to be Seoul and London, with prices expected to drop 3% for both. New York ranks in the middle, in 13th place, with prices expected to increase 2% next year.
Still, even the strongest luxury markets are expected to cool off next year, as interest rates rise and the economy slows, according to Knight Frank. Across 25 cities, Knight Frank expects prices to increase by an average of 2% in 2023, down from the 2.7% that Knight Frank predicted six months ago.
The revision shows that the wealthy globally, seemingly immune to inflation and recession, are delaying major property purchases or becoming more price-savvy due to rising interest rates.
“While key markets are more insulated from the impact of higher mortgage costs, they are not immune,” the report said. “The transition from a seller’s market to a buyer’s market has already taken place across most luxury housing markets.”
Dubai sees a 50% increase in prices in 2022, so the price increase for 2023 marks a significant slowdown. Dubai has seen an increase in the number of wealthy residents over the past year, mainly because Russians are looking for a safe harbor for their wealth, yachts and real estate amid the Western sanctions for the war in Ukraine.
Single-family home prices in Dubai rose 13% in October, while total sales increased 73% year-over-year.
Miami also remains a popular haven for the wealthy, due to low taxes and an increasing number of financial firms with their headquarters or offices in South Florida.
Although New York’s expected 2% gain next year is down from 2022, many brokers are predicting prices will fall next year, especially in Manhattan. Knight Frank said New York would benefit from overseas buyers who are “seeking more, not less, exposure to the US dollar as the Federal Reserve raises interest rates.”
According to the report, Singapore is the only Asian city to make the top 10 and is one of only four cities that are forecast to increase in the past six months. Singapore is benefiting from wealth fleeing from China, as wealthy Chinese nationals move their money – and often their families – to the island to avoid strict lockdown measures imposed by Covid-19 and the slowing economy.
Knight Frank says cash will be king across 25 markets, as buyers willing to pay in cash are more attractive to sellers. Political and economic upheaval in many countries will also lead to a wave of safety in the real estate sector, “pushing buyers to mature and transparent luxury markets.”