Rental performance

Dubai topped the index with gains of 12.1%, followed by Bangkok (9%) and Lisbon (7.5%).

These markets have very strong lifestyle credentials and there is also an element of corporate relocations which are driving demand in these cities, Savills research revealed.

Prime real estate rents in Dubai, the top performer in the index, have been on a multi-year upswing as a raft of conducive pro-business government policies, and attractive residence visa programmes, saw people from around the world flock to the emirate to establish their base.

According to Andrew Cummings, Head of Residential Agency at Savills Middle East, “The Dubai residential market continued its dream run in the first six months of the year, with record-breaking transaction volumes and values. We’re seeing some of the finest brands and developers launching world-class projects in Dubai and the wider UAE to capitalise on the growing demand. However, with existing supply running tight, prime rentals are not expected to cool off anytime soon.”

On the top three performers of the index, Kelcie Sellers, Associate Director, Savills World Research says, “Dubai and Lisbon have been perennial leaders for growth in their prime rental markets because of excess demand for high-quality rental properties, but Bangkok is a new entrant.” Rental demand for prime property in the city has risen due to the higher interest rate environment and the return of tourism and expats to Bangkok after the pandemic.

Across many EMEA markets, demand continues to outstrip supply of prime rental properties, supporting prime rental price growth across the region. In fact, no EMEA market tracked in the index saw rental prices fall from December 2023 to June 2024.

In a higher interest rate environment, rents continued to outperform capital values, growing by 2.2% in the first half of the year, with 25 out of the 30 markets analysed reporting flat or positive rental growth.
Renting also tends to provide international tenants with the flexibility they desire when entering a new market, which has further contributed to these increases. 

Capital value growth

Prime residential property in world city locations remained resilient over the first half of 2024, recording an average capital value growth of 0.8% and outperforming the 0.6% growth predicted for 2024 as a whole. However, wider levels of caution remain among buyers as they await clarity on interest rates.

Year to date, cities in Southern Europe and the Middle East have seen the strongest capital value growth over the first six months of 2024, with Lisbon leading with a rise of 4.2% for the first half of the year. Amsterdam, Madrid, and Athens have each seen capital value increases above 3%, with Dubai rounding up the top five with growth of 2.9% in the same period.

Cummings says, “On a price per sq ft basis, Dubai continues to offer immense value to investors and end-users looking for high-quality, luxurious homes with attractive amenities. Coupled with the lifestyle and connectivity that the emirate has to offer, Dubai continues to be one of the most coveted destinations in the world to live in.”
Across the EMEA region, only two of the 13 markets saw negative capital value growth for the first half of the year. Berlin and London have seen slight price falls of -0.8% and -0.1%, respectively.

Sellers says, “60% of the 30 cities analysed in the Savills Prime Residential World Cities index have seen positive capital growth, reflecting a level of relative confidence in the asset class. While seven cities reported price falls of less than -1%, the strong fundamentals of these local prime residential markets may support the possibility for capital value appreciation in the second half of the year for these locations.”

Savills researchers expect rents to continue to outperform capital values for the remainder of 2024 and in the medium-term as supply continues to remain scarce in many world cities.

Sellers concluded, “High interest rates continue to contribute to caution in the sales markets and are pushing more would-be buyers into the prime rental markets. However, the potential for interest rate cuts in the second half of the year may encourage those would-be buyers to re-enter the sales market, easing price pressures.

“Looking ahead, we predict an average capital value growth of 0.5% for the second half of the year, which would bring total 2024 growth to 1.3%”

Yields

Prime gross yields moved out by 10 basis points in 2023 to 3.1% as global rental markets recorded stronger growth than sales markets, across the 30 world cities surveyed in the index. The average gross prime yield across the 30 markets currently stands at 3.2% across the World Cities, up from 3.1% in December. Los Angeles, New York, and Dubai remain the highest-yielding cities with average yields above 5%.

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