Prime residential property prices in Dubai accelerated 44% in 2021, sending the Emirate to the top of Knight Frank’s Prime International Residential Index 100 (PIRI 100), which analyses prime price performance in 100 cities and second home markets worldwide. Following 7 years of negative price growth, and with overall prices still 30% below their 2014 peak, the Emirate’s relative value came into focus in 2021.
“The UAE’s handling of the pandemic, strong take-up of the vaccine, the delivery of high-end turnkey projects, as well as innovative new visa initiatives and economic reforms, have together boosted Dubai’s profile in the eyes of international buyers. The top end of the market has been particularly active – sales above US$10 million have historically accounted for 2% of all transactions but in 2021, they equated to 7%”, says Kate Everett-Allen, head of international residential research at Knight Frank.
With price growth of 42%, Moscow came in at second place with Russia’s mortgage subsidy programme and tight supply fueling this growth, albeit temporarily. San Diego (+28.3%), Miami (+28.2%), and The Hamptons (+21.3%) make up the rest of the top 5.
The value of the Knight Frank Prime International Residential Index increased by 8.4% in 2021, up from just under 2% in 2020 – its highest annual increase since the index launched in 2008. Of the 100 luxury markets tracked, only 7 saw priced decline in 2021 and a staggering 35% of locations saw prices increase by 10% or more, underlining the strength of the sellers’ market during the pandemic.
Overall, America was the top regional performer, accounting for 6 of the top 10 rankings and posting average growth of almost 13%. Although Asia Pacific (+7.5%) outpaced the EMEA region (+7.2%), this was largely driven by Australasia (+12.3%). Asia alone managed a relatively modest rise of 5.5% growth.
While sunshine resorts from Miami to the Gold Coast shone bright in 2021, with prices climbing 10.2% on average, it was cities that provided this year’s curveball. Overlooked in 2020 as suburbs and resorts attracted those looking for space to hunker down during the pandemic, the city bounced back in 2021, averaging price growth of 8.4%. It seems that Covid-19 hasn’t triggered the ongoing flight from bustling urban centres as predicted. Even ski resorts, which have in recent years posted fairly frosty results, saw average price growth clime to 7.2% in 2021 – Aspen, St Moritz, and Verbier were the top performers.
What’s driving demand? Knight Frank points to low interest rates and the availability of cheap finance, a shortage of prime stock, rising wages and accrued savings in lockdowns, strong-performing equity markets and record bonuses, a reassessment of housing needs and lifestyles, more flexible working patterns, wealth creation – 5 million new millionaires in 2021 globally, growth of co-primary living, heightened demand for second homes, and the appeal of property as an inflation hedge.
Analysing the future of prime price growth in 2022, Liam Bailey, global head of research at Knight Frank says: “Far from running out steam, this year we will see the luxury housing boom endure. Dubai, Miami, and Zurich lead our 2022 forecast, with prime prices expected to end the year between 10% and 12% higher. Asian cities are expected to trail slightly, but even here, prices will grow. Key themes to watch: Agents will complain about stock shortages, buyers will complain about rising taxes and cooling measures, and city markets will be back in demand.”