Rising interest rates are likely to weigh on Sydney’s property market, while Singapore and Dubai will power ahead, according to new research.
Savills Prime Residential World Cities Index found that Sydney has slipped to number 28 on the list of world-leading cities, with capital growth in the prime residential market likely to continue to slow down after a number of record-setting years.
According to the research, Sydney will see growth of -5.9 per cent to -4 per cent over the next 12 months, on the back of -3.7 per cent in the past 12 months.
“Some cities felt global economic turbulence more than others, particularly in the second half of 2022”, Savills said.
“Rising interest rates hit Sydney particularly hard and Hong Kong’s lingering pandemic-related restrictions continued to hamper its prime residential markets.”
Meanwhile, Singapore and Dubai will lead the price charts in 2023, both with projected prime price growth of between 6 per cent to 7.9 per cent.
Both cities will continue to see sustained inflows of high-net-worth individuals; however, they are not immune to higher interest rates and wider economic headwinds.
Singapore’s forecast prime price growth of between 6 per cent to 7.9 per cent is similar to 2022’s 6.8 per cent capital value growth.
Conversely, Dubai’s forecast prime price growth (between 6 per cent to 7.9 per cent) is rather muted compared with its 12.4 per cent capital value growth in 2022.
Similarly, Miami’s predicted prime capital value growth of between 4 per cent to 5.9 per cent is a significant downgrade from the 25.4 per cent growth it recorded last year, driven by a lack of supply at the top end of the market.
Other cities expected to see further growth this year, include Milan, Cape Town, Rome, Madrid, Barcelona and Kuala Lumpur.
Overall, many of the prime residential world city markets are set for a slowdown in 2023 with average price growth of 0.5 per cent forecast across the 30 leading cities.
Head of Savills World Research, Paul Tostevin said changing market conditions will weigh on many of the world’s top real estate markets.
“Recessionary conditions, a higher interest rate environment and inflation will weigh on prime residential performance although the second half of the year holds some potential for global economic growth,” Mr Tostevin said.
“The forecast growth of 0.5 per cent is some way down from the 3.2 per cent we saw last year; however, the rarefied nature of prime residential coupled with a lack of stock, will prevent a sharper slowdown,” Tostevin adds.
Low to modest levels of capital growth are forecast in the southern European cities of Lisbon, Athens, Rome, Milan, Barcelona and Madrid, where prime property is particularly coveted as a safe haven asset and inflation hedge in times of economic turmoil.
With capital value growth of 5.7 per cent, Milan was southern Europe’s top performer in 2022 and it is expected to cement its position this year, with price growth of between 4 per cent to 5.9 per cent.
Prime prices in Hong Kong fell by -8.5 per cent in 2022 and global macro conditions are set to have further impact on the market with expected price falls of between -7.9 per cent to -6 per cent.
However, the city will remain the world’s most expensive prime residential market at $4,070 per square foot.
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