According to a recent report from Knight Frank, 88 luxury homes were sold in Dubai during the first quarter of this year. The report considers properties selling for over $10M as luxury homes. In total, worldwide 417 such properties were sold. Dubai was followed by Hong Kong (67), New York (58), and Los Angeles (46). Dubai is driving the price recovery of luxury real estate sales at a time when the global luxury market registered a negative annual price change for the first time since 2009. Knight Frank's Prime Global Cities Index (PGCI), which tracks activity in 46 markets worldwide, declined by 0.4% in the 12 months through March this year. This is the first time the index has turned negative since the Global Financial Crisis. Knight Frank attributed the decline to higher interest rates and tightening in global monetary policy. Among the 46 markets, annual prices are declining in 16 of them. Though over two-thirds are seeing positive growth, the large price declines in poor-performing markets have decreased the overall global index. Dubai saw an annual growth of 44%, significantly higher than the other cities. The only other city to register a double-digit increase was Miami at 11%. The other cities in the top five markets include Zurich (9.4%), Berlin (5.7%), and Singapore (5.5%). This growth seen in Dubai is not a one-time event. The city saw a 149% growth during the pandemic from March 2020 to March 2023. In the same period, Miami, Los Angeles, and Shangai saw growth at 59%, 35%, and 33%, respectively.
Dubai now accounts for 17% of global luxury real estate sales, a remarkable increase from 2% in 2019. According to Knight Frank, Dubai's monumental growth suggests significant structural change and highlights the city's exceptional market transformation. Knight Frank's global head of research, Liam Bailey, said "The role of Dubai in supporting the global super-prime market cannot be understated. Dubai's sales boom has helped propel prime prices higher since the beginning of 2020, well ahead of the numbers seen in comparable markets." Cities that saw the largest decline in the past year were Wellington (-27%), Aukland (-17%), Christchurch (-15.3%), Toronto (-13.4%), and Frankfurt (-11.1%). Knight Frank expects the luxury real estate market to face sustained downward pressure from current economic conditions. However, it is optimistic that a correction similar to the magnitude seen during the Global Financial Crisis (-8.2%) is unlikely. While 46% of the markets saw a quarterly price decline in the second half of last year, only 28% did in the first quarter of this year — the lowest since Q1 of 2021. It projects luxury purchases to reach $27B this year, down from $33B in 2022. |
