North American cities reach historically high prices

Miami, Los Angeles, San Francisco and New York all experienced above 5% capital value growth in the second half of 2021. The West Coast cities Los Angeles and San Francisco reached historically high capital values in 2021. The increased appeal of property as an investment asset, low interest rates, the easing of pandemic restrictions, and opening of international borders in November contributed to the improvement in price performance in these cities.

Miami was the strongest performer across the Index. The city has been a popular relocation destination in the United States and this trend is predicted to continue as travel restrictions ease and hybrid working improves the mobility of affluent professionals.

The relaxation of restrictions has positively impacted New York’s prime market. The mass exodus the city faced as an immediate consequence of the pandemic left the market with plentiful stock and falling prices. But as residents returned, prime residential property prices have resurged to December 2018 levels.

Economic resilience a decisive driver in Europe

Prime residential activity picked up in Europe in the second half of 2021. European cities, except for Paris, experienced positive price growth. Renowned for their international prime buyers, capital values in cities such as Amsterdam, London and Milan noticeably increased. Berlin achieved the highest capital value growth for 2021, followed closely by Lisbon and Geneva.

Proving economically resilient in 2020, Geneva and Berlin suffered minor falls in real GDP at -2% and -3%, respectively, and less than 1% declines in their employment rates. Outperforming their European counterparts whose real GDP fell more than 5% and suffered steeper declines in employment. Combined with low interest rates, pent-up demand, and a lack of supply, prime residential prices in these cities were set to grow.

Russians have turned to the safe investment of their domestic prime residential markets, increasing price growth. Lisbon has made a strong recovery from its 2020 capital value decline, proving the resilience of its luxury residential sector as the pandemic renewed buyers' desire for wanting more space and a warmer climate.

Conversely, upcoming elections, national and international pandemic restrictions hampered the Parisian prime residential market throughout 2021, with a modest 1.6% capital value decline.

Asia, a mixed picture

Chinese cities have struggled to continue the pace established during the first half of 2021. The tightening of local policy and mortgage markets, and uncertainty around real estate debt financing markets has cooled capital value growth in Shanghai, Hangzhou, Guangzhou, Shenzhen, and Beijing during the second half of 2021. Hong Kong has not evaded these economic and political destabilisations either. Peaking in June 2019, the prime residential market plateaued in 2021 as buyers and investors took greater caution over their prime property purchases.

Meanwhile Seoul, Singapore, Tokyo, and Sydney experienced positive price growth throughout 2021. In Seoul, domestic buyers spent more on singular property purchases following a new government taxation scheme to curb speculative buying on multiple properties. Growth has also been buoyed by the fact that over 80% of South Korea’s population is vaccinated, prime property is scarce, and interest rates are low.

The ‘City of Gold’

Dubai experienced astonishing price growth in the second half of 2021 – levels not seen since before the 2008 financial crash. Rising from a relatively low base, at $630 per square foot, Dubai’s prime residential buyers have flocked to the city for its competitive pricing, quality of life and warm climate.

Although December 2021 capital values were below the market high of December 2014, demand outstripping supply, a successful vaccination program, opening of international borders, and other national government measures have led the city to an impressive performance in 2021.

_{Read the articles within Savills Prime Residential Index: World Cities below.}