Dubai, Miami on list of top luxury real estate markets for 2023

Wealthy investors who bet on luxury real estate will do better next year by putting their money in Dubai or Miami, according to a new report.

Dubai tops the list with prices expected to increase by 13.5% by 2023, ranking 25th in the world’s top luxury or “prime” real estate markets, according to real estate consultant Knight Frank. Miami is in second place, with prices expected to increase by 5%. Dublin, Lisbon and Los Angeles are expected to continue to grow by 4%.

Seoul and London are expected to be the worst performers next year, with prices both expected to fall by 3%. New York ranks 13th, with prices expected to rise 2% next year.

However, even strong luxury markets are expected to cool next year as interest rates rise and the economy slows, Knight Frank says. Across the 25 cities, Knight Frank expects prices to rise by an average of 2% in 2023, down from the 2.7% Knight Frank forecast six months ago.

The correction suggests that the world’s rich, seemingly immune to inflation and recession, are holding off on big real estate purchases or becoming more price-conscious in light of rising interest rates.

“While primary markets are largely insulated from the fall in high mortgage costs, they are not immune,” the report said. “The shift from a seller’s to a buyer’s market is already underway in most prime residential markets.”

Prices in Dubai have risen by 50% in 2022, so the price increase for 2023 represents a significant slowdown. Amid Western sanctions on Ukraine, Dubai has seen a surge of wealthy residents in the past year.

Prices for Dubai single-family homes rose 13% in October, while overall sales volume rose 73% from a year earlier.

Miami is a popular haven for the wealthy, thanks to its low tax rates and the growing number of financial institutions that have located their headquarters or offices in South Florida.

Although New York’s expected next-year increase of 2% is down from 2022, many brokers predict prices will drop next year, especially in Manhattan. Knight Frank said New York would benefit from foreign buyers “looking for more exposure to the U.S. dollar as the Federal Reserve raises rates.”

Singapore is the only Asian city in the top 10 and one of only four cities to do so in the last six months. Singapore is benefiting from a wealth exodus from China as wealthy Chinese citizens move their money – often their families – to the island to avoid severe Covid lockdowns and a sluggish economy.

Cash will be king in 25 markets because buyers willing to pay all cash will be more attractive to sellers, Knight Frank said. Political and economic upheavals in many countries are leading to a flight to safety in real estate, “pushing buyers into mature and transparent luxury markets.”