On Wednesday, Knight Frank reported a 3.1% increase in luxury residential property prices in 2023. Double-digit gains in Manila and Dubai offset declines observed in New York and London.
Last year, rising borrowing costs, inflation, and economic uncertainty caused a significant drop in transaction volumes in property markets. This downturn impacted various sectors and prompted a reevaluation of investment strategies.
According to property agents Knight Frank, an increase in the wealthiest individuals’ portfolios, as stock markets recovered, actively supported luxury property prices. This boost contributed to the resilience of the high-end real estate market.
Manila, the Philippine capital, claimed the top spot on the list of 100 markets tracked by Knight Frank, with prices increasing by 26%. Following closely behind were Dubai, experiencing a 15% surge, and the Bahamas, also witnessing a 15% rise in prices. In 2023, luxury prices in New York and London fell 2%, marking a decline to 8% and 17% below their most recent peaks, respectively, as reported by Knight Frank’s flagship The Wealth Report.
“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, stated.
Kate Everett-Allen, head of international residential and country research, stated that, while “the pandemic-fueled property boom was set to end in tears as borrowing costs hit 15-year highs,” prices had “a much softer landing.”
Unlike residential markets, commercial real estate is undergoing a more severe downturn. The working-from-home trend is driving up vacancy rates, while high borrowing costs actively diminish the value of office buildings.
Global commercial real estate investment fell 46% to $698 billion in 2023, owing to a pullback by US investors, according to Knight Frank.
Surpassing offices for the first time on record, industrial and logistics emerged as the most invested sector, constituting a quarter of global investment, as reported by Knight Frank. Meanwhile, the office market experienced a decline, dropping to 22% from its 2022 position of 25%. These shifts highlight significant changes in investment trends within the real estate landscape.
London-based agents report that private real estate investors, the most active buyers in 2023, are anticipated to boost their purchasing endeavors in 2024. This heightened activity is driven by their objective to capitalize on market “dislocation.” This trend signifies a strategic move within the real estate landscape.
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