Luxury residential real estate markets have proven resilient despite the economic volatility of recent years, according to a recent report by Savills. With 2024 being an “election year,” 2025 is expected to witness changes in government policies, whether in taxation, legislation or international relations, which could impact these markets.
The report forecasts that the average capital value of luxury real estate globally will increase by 1.6% in 2025 across 30 global cities, which is lower than the growth rate of 2.2% in 2024. However, there is a degree of caution in these forecasts due to the persistence of factors that affected the markets last year. Savills also expects Dubai to continue to lead the fastest growing cities in terms of luxury real estate prices in 2025.
Luxury buyers continue to focus on quality of life when choosing properties. Dubai is expected to lead the list of cities with the highest growth in luxury property prices, with an increase of 8% to 9.9%, benefiting from a strong market and new supply that is redefining the definition of luxury property. Sydney will also see strong growth, but it will be driven by a shortage of luxury supply, which will limit buying opportunities and push prices up by 4% to 5.9%.
Cities such as Madrid, Barcelona and Lisbon will see similar growth, with demand in Spain driven by foreign buyers benefiting from a weaker euro, while Lisbon benefits from expectations of lower interest rates. In Cape Town, improved economic activity, increased market confidence and lower interest rates are expected to drive up luxury property prices. In contrast, some cities are expected to see a decline in luxury property prices as a result of government measures or economic challenges.
In London, prices are expected to fall by around 2% due to the removal of non-resident status and the introduction of a land tax surcharge, despite a potential boost from capital inflows. In Singapore, measures targeting foreign buyers have dampened demand, with price changes expected to range between 1.9% and 0%. In tech hubs such as Shenzhen and San Francisco, property prices are expected to fall slightly, between 0% and 1.9%, despite the global tech sector’s improved performance.
The list includes other cities and a range of expected price increases, ranging from 4% to 5.9% in Cape Town, and 2% to 3.9% in Tokyo, Shanghai, Kuala Lumpur and Mumbai. In the US, mortgage interest rates are expected to continue to influence the market through 2025. As they gradually decline, supply and market confidence will improve. Growth in four US cities in the Global Cities Index is forecast at around 0.7%, with Miami topping the list with a 2.5% increase, while New York will be flat and Los Angeles could see price changes between 1.9% and zero. Despite ongoing economic and political challenges, some cities still offer strong growth opportunities in the luxury real estate sector, while government policies could negatively impact other markets.