A tale of prime cities

Twelve months ago, the world was facing a wave of elections and geopolitical uncertainty. Now those elections are over – and property purchasers are experiencing the effects of fiscal and regulatory changes enacted by recently formed governments. Yet in this climate of fast-shifting migration patterns, particularly for the wealthy, prime residential property in cities continues to show durability in the face of flux, or “resilience amid divergence” as the International Monetary Fund recently headlined its global economic forecast.

 The latest Savills Prime Residential Index: World Cities reveals that 70% of the 30 cities tracked saw positive growth in 2024 – achieving an average of 2.2%. In 2025, the average growth is forecast to be 1.6% – with Dubai, Sydney, Madrid, Lisbon, Barcelona and Cape Town expected to be the strongest performers.

Kelcie Sellers, Savills World Research associate director, says: “For 2024 we had anticipated a 0.6% average capital value increase, but by halfway through the year forecasts had already been exceeded. Greater certainty around interest rates in 2025 should attract more buyers into prime residential property markets. This trend will also shrink the gap between the purchase market and the still stronger rentals sector in 2025.” 

The anticipated decrease in interest rates, however, will be offset by a global landscape that continues to be unpredictable, so residential sales markets in 2025 will see “muted growth” compared to the higher averages of 2022-24.

The stars of the World Cities Index are familiar. The top performer, once again, is Dubai, the standout destination for prime residential property. From unrivalled connectivity and modern infrastructure to the superb quality of life and dynamic business culture, the reasons for its appeal are well established. But the sheer momentum of Dubai’s success is reflected in the plethora of new luxury developments, including many branded residences. Population growth and an influx of wealthy individuals for lifestyle, business and tax reasons continue to underpin strong demand for property, with prime rental values in 2024 surpassing the 2016 market peak. That said, capital growth slowed from a heady 17.4% in 2023 to a (more) normal market rate of 6.8% last year, with 8%-9.9% forecast for 2025. 

Sydney is also expected to have strong growth – 4%-5.9% – although that is driven more by the lack of supply rather than a fresh influx of investors. A scarcity of luxury properties continues to drive prices upwards in the face of sustained domestic and international demand. 

In Europe, the Iberian cities reign supreme, with Madrid, Lisbon and Barcelona all forecast to see growth of 4%-5.9% in 2025 – marginally down from the levels of 2024, but still strong. With its world-class cultural venues, luxury shopping and buzzing restaurant scene, Madrid continues to attract wealthy incomers: strong interest from Latin American and US buyers has helped to drive prices in the Spanish capital to €11,000 per square metre. 

The appeal of the sunny lifestyle that can be enjoyed in one of Europe’s most beautiful cities, coupled with a benign tax regime, enables Lisbon to keep up with its Spanish neighbours. “Lack of prime residential housing despite continuing demand is an issue,” says Sellers. 

At the other end of the capital value growth spectrum, Singapore, China and the UK have all felt the cooling effect of tax changes. In Singapore, a significant increase in stamp duty for foreign buyers underlines a growth projection of between 0% and -1.9% for 2025. 

Non-dom taxation changes and stamp duty increases are imminent in London, where a fall of 2% is forecast – but decreasing mortgage rates might sugar the pill. What’s more, “London remains a desirable financial centre, especially with US buyers keen for a European base – and it is perceived as a value proposition,” says Sellers. For some, London’s outstanding cultural, educational and lifestyle attractions will continue to outweigh tax considerations.

Across China, transactions remain low, due in large part to weaker levels of market confidence. Prices remain down in all five of the Chinese cities that feature in the index: Hangzhou (-1.4%), Beijing (-2.1%), Shanghai (-2.4%), Guangzhou (-4%) and Shenzhen (-4.2%). 

In the US, the high mortgage rates of last year will prevail into 2025 and, with many homeowners on 30-year fixed tariffs unlikely to budge, markets have “slowed to a crawl”, says Sellers. Of the four US cities in the index, Miami is expected to do best at 2%-3.9%, thanks to its obvious lifestyle and cultural appeal, combined with its role as a financial and business hub connecting the Americas. It is followed by New York City and Los Angeles, with projected growth of between 0% and 1.9%, while for San Francisco the forecast is 0% to -1.9%.

Despite the prevailing uncertainty, there is no change in the five most expensive global residential markets in 2025: Hong Kong, New York, Geneva, Tokyo and Shanghai. At the pinnacle of prime markets, it seems, resilience really is deep-rooted, while the movement of wealth continues to drive growth in the prime property markets in cities such as Madrid, Miami and Dubai.

Read the Savills Prime Residential Index: World Cities in full