Knight Frank reported on Wednesday that luxury residential property defied the trend of declining prices in 2023, rising 3.1% as double-digit gains in cities like Manila and Dubai countered declines in New York and London.
Property markets were hit hard last year by rising borrowing costs, inflation, and economic uncertainty, which resulted in a sharp decline in transaction volumes.
According to real estate agent Knight Frank, this supported the prices of luxury properties along with an increase in the wealthy’s portfolios as stock markets recovered.
Manila, the capital of the Philippines, topped the list of 100 markets that Knight Frank tracks, with prices rising by 26%. Dubai and the Bahamas came in second and third, respectively. According to Knight Frank’s flagship The Wealth Report, luxury prices in New York and London fell 2% in 2023 and are currently 8% and 17% below their most recent peaks, respectively.
“As wealth portfolios recovered in 2023, affluent buyers targeted residential property in the world’s luxury markets,” Liam Bailey, global head of research at Knight Frank, said in a statement.
Kate Everett-Allen, head of international residential and country research, noted that while “the pandemic-fuelled property boom was set to end in tears as borrowing costs hit 15-year highs”, there had been “a much softer landing” for prices.
In contrast to residential markets, the trend of working from home is increasing vacancy rates and devaluing office buildings, which is making the downturn in commercial real estate more severe.
Due to a retreat by American investors, global investment in commercial real estate fell 46% in 2023 to $698 billion, according to Knight Frank.
For the first time, industrial and logistics beat out offices to become the most invested sector, taking a quarter of all global investment, while the office market shrank to a 22% share from 25% in 2022, according to Knight Frank.
According to the London-based agents, private real estate investors, who were the most active buyers in 2023, appear set to step up their purchases in 2024 as they try to capitalize on a “dislocation” in the market.