Global Luxury Housing Market Shows Resilience Amid Geopolitical and Economic Challenges

Despite ongoing regional conflicts, rising mortgage rates, and inflation, the global luxury housing market has displayed remarkable resilience, with recent inflation figures indicating a potential turning point. The response of central banks to these challenges varies, with leaders in Canada and the UK signaling their intent to address inflationary risks, while counterparts in Europe and the US appear more relaxed in their stance.

Amid these geopolitical and economic headwinds, there has been a notable shift in buyer behavior, with 52% of prime buyers now opting for cash purchases, an increase from 46% six months ago. However, governments are facing mounting challenges as public debt in the affluent world reaches historic levels relative to GDP, leading to the possibility of rising taxes, particularly targeting property and wealth.

Despite these challenges, the overall prime price forecast for 2024 has seen a positive shift, with the outlook for 2023 also showing improvement. Some prime buyers appear confident that the worst is behind us, and with inflation receding and interest rate hikes entering their final chapter, buyer appetite has strengthened in some markets.

The landscape of slower price growth looms on the horizon, courtesy of the elevated cost of debt. While persistent inflation poses a potential threat to delicate buyer sentiment, the advent of new property cycles is expected to entice opportunistic buyers, who are likely to explore new locations and diverse property sectors.

In the 2023 rankings, Dubai emerges as the leader, anticipating annual growth of 14% over the full 12 months. Madrid, Stockholm, Seoul, and Miami round out the top five, each city either rebounding from recent price declines or experiencing robust wealth migration. Looking ahead to 2024, Auckland emerges as the front-runner, anticipating a robust 10% increase in luxury prices, with Dubai claiming the third spot with projected prime price growth of 5%.

According to Knight Frank, elections rank as the biggest potential risk to prime markets worldwide in 2024, with the relaxation of tax and property regulations considered the biggest opportunity. The top five biggest luxury housing market risk factors for 2024 include elections, climate risk, undersupply of luxury homes, higher taxes on the wealthy, and inflation and rising interest rates.

Despite the challenges posed by geopolitical crises, rising mortgage rates, and inflation, the global luxury housing market has shown resilience and positive growth prospects for 2024. The shifting buyer behavior and the emergence of new property cycles indicate opportunities for both buyers and investors in the luxury housing market.