Douglas Elliman and Knight Frank’s Wealth Report 2025 provides a compelling look at how prime residential markets have evolved over the past year. With global interest rates edging lower, luxury real estate prices have continued to rise steadily, marking a 3.6% increase in 2024, slightly outpacing 2023’s 3.3% growth.
Of the 100 luxury markets tracked in Knight Frank’s Prime International Residential Index (PIRI), 77 recorded positive annual price growth, with the Middle East and Asia leading the charge.
Middle East and Asia Dominate the Global Rankings
High-growth markets were concentrated in Asia and the Middle East, with cities in these regions securing the top spots for luxury residential price appreciation:
- Seoul, South Korea: +18.4%
- Manila, Philippines: +17.9%
- Dubai, UAE: +16.9%
- Riyadh, Saudi Arabia: +16%
- Jeddah, Saudi Arabia: +9.6%
The Middle East posted strong regional performance with a 7.2% increase, driven by robust demand and limited supply of high-end inventory. Meanwhile, Latin America and the Caribbean saw a 6.3% gain, reinforcing the long-term trend of wealth migration to sunbelt and resort destinations.
In contrast, North America’s luxury market grew by 2.4%, as U.S. and Canadian markets adjusted following several years of rapid appreciation. Miami, once a frontrunner, saw a slower pace of growth, but key U.S. sunbelt cities and resort markets still performed well.
Luxury Resort Markets Continue to Outperform
Resort markets continue to be the biggest beneficiaries of post-pandemic trends. Over the past several years, price appreciation has been led by second-home destinations, including Palm Beach (+117%), Miami (+84%), and Aspen (+73%).
Since 2020, resort and coastal markets have seen nearly 30% growth, compared to:
- 25% for ski destinations
- 19% for major global cities
This trend underscores the ongoing shift toward lifestyle-driven real estate, as wealthy buyers continue to prioritize wellness, privacy, and accessibility to nature.
Interest Rates and Market Sentiment
While interest rate cuts in 2024 supported price growth, mortgage rates remain historically high, limiting the pace of new demand in some developed markets. Liam Bailey, global head of research at Knight Frank, notes that additional rate cuts in 2025 will be necessary to fully restore market momentum in certain regions.
“Even for prime markets, interest rates remain the key story. While the direction of travel is positive for house prices, the reduction in debt costs is still not sufficient to turn this into a trend in most markets. It will take additional rate cuts during 2025 to restore momentum.” – Liam Bailey
Luxury Real Estate: How Far Does $1 Million Go?
Each year, The Wealth Report tracks the buying power of $1 million in prime global cities, highlighting the dramatic shifts in real estate affordability over the past decade.
- Miami, Dubai, and Lisbon have seen surging price growth, making them increasingly exclusive for luxury buyers.
- London, Monaco, and New York have experienced price corrections and currency fluctuations, leading to more balanced pricing for high-end properties.
This shift highlights how global wealth distribution and economic trends have influenced the luxury property landscape.
Limited Supply Continues to Drive Prices Higher
Despite strong demand, the luxury property market continues to face supply constraints, which are propping up prices in major cities.
- New-build inventory remains historically low in key global markets, due to:
- Supply chain disruptions
- High construction costs
- Skilled labor shortages
- London’s new development pipeline is running 25% below its 10-year average, further tightening supply.
- New York’s prime inventory levels remain 10% to 20% below the five-year average, although listings have improved slightly compared to early 2024.
The combination of strong demand and limited supply means that, even in a high-interest-rate environment, luxury properties remain a strong asset class for ultra-high-net-worth individuals (UHNWIs).
Looking Ahead: What’s Next for 2025?
As global central banks continue to adjust interest rates, the trajectory of luxury real estate will largely depend on:
- Further reductions in borrowing costs
- The availability of prime properties
- Wealth migration trends
While global price growth is expected to continue, regional variations will be significant. Markets with strong economic fundamentals, investor-friendly policies, and lifestyle appeal—like Dubai, Miami, and resort destinations—will likely continue to see steady appreciation.
With demand for high-end homes remaining resilient, 2025 is shaping up to be another pivotal year for luxury real estate.
