Dubai’s luxury property market recorded the third highest price growth among global cities last year, consultancy Savills said on Thursday, with prime residential centres set to be a safe haven for investment in 2022.
The city’s real estate market is expected to achieve capital growth of 4 to 5.9 per cent this year after growing 17.4 per cent in 2021, according to Savills World Cities Prime Residential Index, as the economy recovers from the Covid-19 pandemic and demand outstrips supply.
“Dubai experienced astonishing price growth in second half of 2021, reaching growth not seen since before the financial crash in June 2008, driven by strong demand which outstripped supply, a successful vaccination programme, opening of international borders, and other national government measures,” Savills said in a statement on Thursday.
Dubai's buoyant property market is set against a wider uplift across the globe, with capital values increasing 6.9 per cent in 2021, representing a significant increase on 2020 when the world was hit by the full force of the pandemic.
The US cities of Miami and Los Angeles topped the chart with annual growth reaching a staggering 21 per cent and 20 per cent respectively, driven by rising incomes, affluent buyers and a return of urban migration. Miami was the strongest performer overall as more people relocated to the destination, attracted by its warm climate and quality of life.
“Prime rental growth has made a staggering recovery in the second half of 2021, creating an ongoing imbalance between supply and demand which is underpinning increased prices,” said Paul Tostevin, head of Savills World Research.
The surge in capital values was particularly strong in the second half of 2021, increasing by 3.2 per cent in the second half of the year — a significant increase on the same period in 2020, when capital value growth dipped into negative territory.
“2021 was a year of returns. Workers returned to offices in some countries, international students returned to their desks, and cities returned to being hotspots for living, work, and play,” said Lucy Palk, analyst at Savills World Research.
“As restrictions lifted in some markets, prime residential real estate maintained its resilience and continued its trend of growth in the face of uncertainty.”
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Looking ahead, as economies recover from Covid-19 and adapt to living with the virus, average prime capital value growth across all key cities is expected to hit 4.3 per cent in 2022, the second highest level in five years, with Miami and Berlin on track to lead the charge with increases of 10 per cent or more.
“Despite the threat of market cooling measures, such as rising interest rates, 2022 looks on course to continue the positive trend of 2021”, said Paul Tostevin, head of Savills World Research.
Twenty-eight out of the 30 cities assessed by the index are in line for growth this year, as low interest rates and rising incomes have increased mortgage affordability.
Some cities, including Dubai, Miami and Lisbon also benefited from the flexibility of remote working, and the desire for more space, Savills said, with education and travel set to deliver growth to all major cities alongside a return to offices.
While Miami has the strongest growth forecast among North American cities, which are all forecast to grow more than 4 per cent in 2022, Berlin is the expected leader of European cities with growth of at least 10 per cent expected, driven by a buoyant economy, strong domestic and international demand, coupled with a shortage of stock.
In New York, the relaxation of restrictions has had a positive impact with the mass exodus from the city seen at the start of the pandemic — which left the market with plentiful stock and falling prices — now replaced by surging growth to December 2018 levels as residents return.
Cities in Asia Pacific are expected to see relatively mixed growth, held back by continuing Coivd-19 restrictions. However, Seoul, Singapore and Sydney are still forecast to grow by more than 4 per cent, despite governments actively implementing measures to cool down their prime markets.
In Europe, most cities experienced positive price growth, with capital values in cities such as Amsterdam, Milan and London noticeably higher.
While prices were only up 2.1 per cent last year overall, the market is expected to see growth of up to 7.9 per cent in 2022.
London’s super-prime property market enjoyed buoyant sales last year as wealthy house hunters sought to upsize their homes amid a clamour for space since the Covid-19 pandemic began, with 522 sales of homes valued at more than £5 million ($6.8m), the highest figure since 2013.