U.S. housing prices have finally started to fall in general.
The median price for existing-home sales totaled $379,100 in October, down 1.5% from $384,800 in September and 8.4% below a record high of $413,800 in June, according to the National Association of Realtors.
But the picture is different for luxury residential properties in many of the world’s biggest cities. Of 25 cities tracked by global real estate consulting firm Knight Frank, it forecasts price gains in 15 of them next year. That includes all the U.S. cities on the list: Miami (5%), Los Angeles (4%), and New York (2%).
The average projection for the 25 cities is a gain of 2%.
Dubai’s No. 1
Dubai topped the list, with Knight Frank predicting an increase of 13.5% for luxury home prices there next year. Miami placed second at 5%. And Dublin, Lisbon, Los Angeles, Madrid, Paris and Singapore tied for third at 4%. New York and Tokyo tied for 13th at 2%.
To be sure, the global luxury home market does face obstacles. “Although prime markets are more insulated to the fallout from higher mortgage costs, they’re not immune,” Knight Frank’s report said.
In the U.S., the 30-year fixed mortgage rate averaged 6.58% in the week ended Nov. 23, up from 3.1% a year earlier, according to Freddie Mac.
“The transition from a seller’s to a buyer’s market is already underway across most prime residential markets,” the report said.
But prime prices would need to drop 30% to 40% in some cities to return to their pre-pandemic levels of 2019.
And the 2% average price increase that Knight Frank sees across luxury markets next year would exceed the gains in six of the last 10 years.
The Dubai’s forecast is lower than its gains of the past two years, when property buyers were attracted by its relative affordability, the report said.
U.S., Europe, Asia
Its forecast for Miami and Los Angeles have dipped in the past six months as “recessionary fears strengthen, fixed mortgage rates in the U.S. have exceeded 7% [before slipping back] and, in Los Angeles, a mansion tax is being considered for homes priced above $5 million.”
The projection for New York is a 2% price ascent next year. That figure exceeds the growth recorded in nine of the past 10 years. “Overseas buyers are seeking more exposure to the U.S. dollar as the Federal Reserve ramps up [interest] rates,” the report said.
European cities accounted for six of the top 10 rankings. “Despite, or perhaps because of, the eurozone’s impending recession, safe haven capital flight looks set to bolster prime markets,” the report said.
Singapore is the only Asian city in the top 10. “New visa measures and the governments’ efforts to attract more family offices are helping to position the city-state as Asia’s regional wealth hub,” the report said.
The bottom four cities on the list, are Edinburgh and Vancouver, which are seen experiencing 2% price declines next year; and London and Seoul, which are seen with 3% decreases. The U.K. is in the midst of a recession.