Why Luxury Home Prices Around the Globe Dipped for the First Time in a Decade
The luxury housing market is in a bit of a slump.
For the first time since 2009, luxury home prices around the world dropped, Bloomberg reported on Wednesday. In the first quarter of 2023, an index of prices in 46 major cities fell 0.4 percent compared with Q1 of 2022, according to the real-estate consultancy Knight Frank. (The company considers “prime homes” the top 5 percent of a market in terms of value, Bloomberg noted.)
“The slowdown in growth has overwhelmingly been driven by sharply higher interest rates following recent tightening in global monetary policy,” wrote Liam Bailey, the global head of research at Knight Frank.
New Zealand led the pack with its downfall: Luxury home prices in Wellington, Auckland, and Christchurch all dropped by double digits, with Wellington falling a whopping 27 percent. Cities like San Francisco and Vancouver also saw pretty significant declines, with 10 and 9 percent, respectively. More modestly, locales such as Hong Kong, New York, and Los Angeles saw price drops closer to 1 percent.
While the overall index did see a downward trend, the majority of cities included actually experienced an increase in prices during the first quarter of the year. London saw a small gain of 0.5 percent, while Zurich and Miami had a 9 percent and 11 percent jump, respectively. At the head of the pack, Dubai saw a bonkers 44 percent increase in luxury home prices. Since March 2020—the start of the pandemic—the Middle East city has seen prices explode by 149 percent.
That growth is certainly impressive, but it wasn’t enough to keep prices from increasing overall, and the slight drop-off is a big swing from the 10 percent jump in global luxury home prices seen in the last quarter in 2021. Still, while the luxury real-estate sector may continue to see decreases in the next few quarters, Bailey wrote, it’s unlikely to get as bad as it was during the 2008 financial crisis, when prices fell a little more than 8 percent from peak to trough.
Perhaps that will provide a bit of comfort to those riding the waves of the luxury market.