Global prime homebuyers wait for answers
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Uncertainty pervades prime global housing markets. Knight Frank's Prime Global Cities Index, which tracks the value of luxury homes in 44 cities, recorded 2.8% growth in the year to March 2025, a marginal slowdown from the 3.2% recorded in the previous quarter and well below the long-run trend rate of 5.3%.
The degree to which central banks would cut interest rates was the key question during the early months of the year, and that uncertainty has only grown. President Donald Trump's "Liberation Day" arrived just two days after the close of the quarter- a move that may ease price pressures abroad even as it intensifies inflationary risks at home.
Whether or not that proves to be the case, buyers in this segment will require greater clarity on the pace and extent of future rate cuts before we see significant upside in most housing markets. And clarity doesn't feel imminent, given the fact that the US government is redrawing its trade policy almost daily as the realities of trade barriers become clear. The latest retreat concerns auto parts, but more are almost inevitable.
Prime pulse
Asia-Pacific and the Middle East continue to lead the recovery in our index. Seoul remained a standout, with robust growth of 18.4%, driven by rising wealth and increasing institutional activity in the luxury residential segment. With an expectation that the yen will strengthen through 2025, Tokyo has continued to see overseas demand influence the top of the market. At the same time, Manila remained among the strongest performers in Asia.
Dubai, after a sharp deceleration in 2024, has stabilised at 16.4% growth through the year. While Asia has many strong performers in terms of price growth, some key Chinese markets, such as Guangzhou and Beijing, are struggling. European cities show mixed results, with some markets such as Stockholm and Lisbon improving, while others including London and Vienna showing slower growth or slight declines. See the table in the report for a full breakdown.
Knight Frank’s Wealth Report forecasts city-level outcomes ranging from +5% annual growth in Dubai to 0% in markets such as Singapore and Hong Kong.
In a funk
Consensus is building around the idea that tariffs will be disinflationary in the UK – the latest endorsement of that theory came from Bank of England rate setter Megan Greene last week.
This shift in the outlook kicked off a cycle of mortgage rate cuts among the major lenders – a repricing that has since developed into a fierce battle for market share. HSBC on Monday released a 3.88% two-year fixed rate product for borrowers with a 40% deposit. Barclays became the latest lender to announce cuts yesterday.
These moves may be just enough to lift the mainstream property market out of the funk it's currently in after the April 1st changes to the stamp duty thresholds. Average house prices fell 0.6% in April, Nationwide reported this morning, which is unsurprising given the fact that many buyers squeezed transactions through in March.
The outlook is particularly tough to call. Borrowing costs look set to fall meaningfully through this year, but sentiment is worsening and – as Tom Bill points out – the Autumn budget will loom large after the summer.
Student shock
Tariffs are the headline act of unpredictable US policymaking, but they’re just one of several forces now reshaping real estate markets. The US administration has moved to cancel more than 1,500 student visas in recent weeks in a process that is now mired in legal challenges.
The potential breakup of the US Department of Education, along with withheld federal grants, rescinded student visas, and considerations for sweeping travel bans, are all likely to fuel a decline in international students choosing the US as a destination to study.
Could the UK student market be a beneficiary of the chaos? Perhaps, though UK-bound international students may be targeted in the incoming Immigration White Paper. The team get together to discuss the issue for a new edition of Intelligence Talks – download it here, or wherever you get your podcasts.
Investment in UK purpose-built student accommodation (PBSA) was robust during the first quarter of 2025, following a quieter than expected end to 2024, according to Knight Frank's new Q1 report. In total, 18 deals completed in Q1 with a combined value of nearly £750 million. Both total spend and deal volumes in Q1 were in line with last year.
In other news...
From our team - Tom Bill on the UK's safe haven status. Kate Everett-Allen on Europe's web of Airbnb rules.
Elsewhere - Tony Blair on 'irrational' climate change policy (The Tony Blair Institute), Britain unprepared for worsening impact of climate change (Reuters), and finally, Singapore's Billionaire class unsettled by moves to narrow wealth gap (Bloomberg).