The Emirate of Dubai has topped Knight Frank’s Prime International Residential Index 100 (PIRI 100), which analyses prime price performance in 100 city and second home markets worldwide.
The prices of luxury homes in Dubai rose at the fastest rate on record, accelerating 44% in 2021, according to The Wealth Report, Knight Frank’s latest research report.
Following seven years of negative price growth, and with overall prices still 30% below their 2014 peak, Dubai’s relative value came into focus in 2021.
With price growth of 42%, Moscow came in second place. Russia’s mortgage subsidy programme and tight supply fuelled price growth, albeit temporarily. San Diego climbed 28.3%, Miami was up 28.2%, and The Hamptons rose 21.3%), to make up the rest of the Top 5 on the PIRI 100.
The partner and head of Middle East Research at Knight Frank Middle East, Faisal Durrani, said: “The relentless demand from the world’s wealthy has fuelled a spectacular turnaround in the fortunes of Dubai’s residential market, with the decisive handling of Covid-19 by the authorities attracting the attention of global investors.
“And in a sentiment driven market, this has helped to spectacularly mark the start of the city’s third property cycle. It’s unlikely the growth of 2021 will be repeated this year, but with such limited prime stock, the top end of the market still has room for growth”.
Ultra-high net worth investors flock to Dubai’s luxury homes
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 seven saw prices 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.
The partner and head of Prime Residential at Knight Frank Middle East, Andrew Cummings, said: “Dubai’s status at the top of the Prime Price Index is not a surprise. In the post-Covid landscape, ultra-high net worth buyers have descended on Dubai in very large numbers and whilst their initial visits have been fuelled by the UAE’s handling of the pandemic, their decision to purchase property in the Emirate has been fuelled by something entirely different.
“Dubai’s investments in world class infrastructure, health and education, coupled with the exceptional lifestyle and amenities, from the world’s best restaurants and hotels have helped transform the city into a destination that people want to own a property in.”
Cummings added: “At the top end of the market, quality is now the watchword with developers building super-prime properties to cater to the demands of the global elite, who over the last year have shown themselves eager to own a home in Dubai.
Overall, the Americas were the regional top performer, accounting for six of the top ten 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.
Although 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%.
Covid-19, it would seem hasn’t triggered the ongoing flight from bustling urban centres that some were predicting. Even ski resorts, which have in recent years posted fairly frosty results saw average price growth climb to 7.2% in 2021 – Aspen, St Moritz and Verbier were the top performers.
What’s driving demand for luxury homes?
- Low interest rates, 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 need 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
- The appeal of property as an inflation hedge
Analysing the future of prime price growth in 2022, the global head of research at Knight Frank, Liam Bailey, said: “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.”
Follow us on