Amidst the backdrop of rising interest rates impacting the luxury property market, Dubai has managed to stand out with remarkable sales of homes valued at $10 million or more. According to the latest Global Super-Prime Intelligence report from Knight Frank, Dubai saw a substantial increase in super-prime property sales during the second quarter of this year, totaling an impressive $1.5 billion in volume.
In a comprehensive survey spanning 12 key international markets, the report revealed that sales of residential properties exceeding $10 million, often referred to as super-prime estates, experienced a 13% decline in the second quarter of 2023 when compared to the same period the previous year. This decrease reflects the impact of higher interest rates on borrowing costs in the luxury real estate sector.
Over the 12 months leading up to June, the total value of super-prime residential sales in these surveyed markets dipped just below $30 billion. This represents a significant drop from the peak value of $40.7 billion recorded in the same period in 2021. However, it’s worth noting that these figures remain considerably higher than the pre-pandemic levels of $18.6 billion recorded in 2019.
The luxury property market’s challenges have been exacerbated by multiple interest rate hikes, bringing the federal policy rate to a range of 5.25%-5.50%. Despite these hurdles, Dubai, alongside only three other markets—Sydney (46%), Paris (17%), and Geneva (7%)—managed to achieve remarkable growth in super-prime residential property sales volume between the second quarters of 2022 and 2023, boasting an impressive 79% increase.
During Q2 2023, Dubai led the global super-prime real estate market with $1.582 billion in sales, comprising 95 properties. In total, Dubai recorded 320 super-prime property sales throughout the year, amounting to a staggering $5.834 billion.
Other prominent cities in the super-prime property market included New York, ranking second with $1.142 billion in sales from 67 transactions, followed by London with $1.034 billion from 54 sales, and Hong Kong with $834 million from 42 sales. These cities collectively witnessed a total of 422 super-prime property sales during the quarter.
Dubai’s rise as a global leader in luxury real estate can be attributed to the influx of wealth from across the world into the city. The UAE, including Dubai, has established itself as a luxurious haven for affluent expatriates and investors, including crypto millionaires and wealthy Russians seeking refuge from Western sanctions.
Furthermore, the UAE, along with other Gulf states, maintained economic growth rates above the global average in 2022, buoyed by energy exports and relative economic stability during the Russia-Ukraine conflict and the ongoing effects of the COVID-19 pandemic. These factors have contributed to an environment that is increasingly welcoming to high-end property buyers.
The UAE experienced the highest net inflow of millionaires globally last year, witnessing a net increase of 5,200 residents with a net worth of $1 million or more, according to the Henley Private Wealth Migration Report 2023. In contrast, China, the United Kingdom, and Russia saw a decline in their total number of millionaires.
Looking ahead, Liam Bailey, the global head of research at Knight Frank, anticipates a further reduction in global super-prime property trade volume in the coming year as the market retreats from recent highs. The main challenge across many markets in the near term is the limited supply, as there has been a lack of new development projects between 2020 and 2022. This shortage is expected to lead to increased competition for available super-prime properties, which, in turn, should help stabilise pricing in this exclusive real estate segment.
Original article reference: Al Monitor.