With more certainty around interest rates, buyers across the globe are once again weighing up property decisions. Prime residential property has remained resilient in the face of uncertainty, and 2024 was no exception with total capital value growth of 2.2% for the year.

Dubai remains a key player in the global prime market, with capital value and rental growth going from strength to strength. This market is highly international and has attracted new residents from across the globe in recent years. Sydney, a more domestic market but in equally high demand, is also seeing strong levels of growth. Supply is key in Sydney and many world cities, with prime buyers chasing limited volumes of high-quality stock.

Sunny climates have brought positivity to prime residential markets. World Cities in Portugal and Spain certainly benefitted from this trend in the last year. Lisbon has retained its global appeal and continues to attract new residents. The strong price growth we saw in 2024 in Madrid and Barcelona is forecast to continue in 2025, with more buyers from the Americas taking notice.

Although a degree of uncertainty continues, especially around policy directions, residential markets remain strong. For 2025, we anticipate slightly lower price growth but remain optimistic about the outlook. Best-in-class property continues to be a sanctuary, both as a home and as an investment, which will continue to support growth in the coming years.

Around the world in 30 cities

A quarter of a century into the new millennium and the world of 2025 is vastly different to the world of Y2K. The internet has revolutionised the way that people communicate, work, and interact with the world around them. Financial crises have shifted priorities for governments, households, and individuals alike. Changing political norms, conflicts, and diverging economic trajectories have shifted migration patterns for people and capital.

But through all the change, people still prioritise property, particularly residential property. Rather than simply being four-walls-and-a-roof, residential property represents something both concrete and ephemeral: home. Whether it’s one residence or part of a portfolio of properties, a home is an emotional and physical tie to a place.

The changes brought over 2024 have had numerous and wide reaching effects on global property markets. The beginnings of a descent in global interest rates brought a slight thaw in some prime residential markets.

However, the year of elections saw a trend of anti- incumbency which has the potential for ripples in the housing markets and beyond in 2025. For global prime residential markets, legislation remains front of mind both for policymakers and buyers. From changes to taxes and regulations to encourage or dampen demand in key global cities, to shifting domestic and international migration patterns, residential markets will likely be a key area of focus for governments worldwide.

(CAPITAL) VALUE PROPOSITION

Greater clarity around interest rates during 2024 reinvigorated the appeal of investing in prime residential properties. Capital values for prime properties in World Cities rose by 1.3% in the six months leading up to December, on top of a 1.2% gain earlier in the year, bringing total annual growth to 2.2%. While this falls short of the post-lockdown peaks, it aligns with performance trends over the past two years.

Spanish cities saw the strongest capital value growth in 2024, with increases of 9.4% in Madrid and 8.6% in Barcelona for the year, supported by a continued surge in demand from domestic and international buyers.

Across the 30 index locations, 70% of the cities tracked reported positive capital value growth for the year.

Three cities, London, Miami, and Hangzhou, reported price falls of less than -2% in 2024 but the strong fundamentals of these local prime residential markets may support capital value appreciation during 2025.

Prime rental markets continue to outpace sales markets, but the gap is narrowing as the rate of rental growth slows from headier levels. In the six months to December 2024, rental values grew by an average of 1.9%. This is in addition to the 2.3% growth in the first half of the year.

The gap between the growth levels for capital values and rents narrowed over the course of 2024 as a result; from a gap of 130 basis points in June to 60 basis points in December.

It is likely that as interest rates continue to decline over the near to medium term, this gap will continue to shrink as buyers who had put their plans on hold return to the purchase market.

Prime yields moved out by five basis points in 2024 to 3.15% as global rental markets recorded stronger growth than the sales markets.

Dubai continues to be a standout destination for prime residential property, with capital values increasing 6.8% and rents growing by a record-breaking 23.5% for the year. Population growth and an influx of high net worth individuals and family offices to the UAE are underpinning strong demand for residential property, particularly in the prime markets.

Confidence in markets continues to be a key driver for prime residential markets worldwide. With political and economic changes on the horizon for all nations, buyers and renters are taking a pragmatic, and often cautious, approach to their property decisions for the year ahead.

World city prime residential capital value and rental growth

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