In spite of the economic turbulence of recent years, prime residential markets have proved remarkably resilient. With 2024 dubbed the “year of elections”, 2025 looks set to be a year in which these new governments start to make changes. From taxes to legislation to international affairs, each change has the potential to affect prime residential property markets.
As such, we expect a positive, albeit slightly muted, average global capital value increase of 1.67% across the 30 global cities we monitor in 2025. That’s lower than the average growth of 2.23% recorded in 2024. However, there is a degree of caution in this forecast as the headwinds which affected global residential markets last year have not yet abated.
Average prime residential capital value growth
World city average
Source: Savills Research
Chasing the sun
Prime buyers worldwide will likely continue to prioritise lifestyle in their choice of residential property. Dubai, a perennial leader for capital value appreciation, is forecast to top the leaderboard in 2025, with prime price growth of 8-9.9% for the year. A market with growth, supported by a strong supply pipeline, Dubai has seen a number of projects in recent years which have rewritten the market definition of ‘prime’.
Sydney is also expected to record strong growth, but here it will be driven by a lack of supply, rather than new supply. The persistent scarcity of luxury properties is expected to limit buying opportunities. Coupled with sustained demand from domestic and international buyers and a relatively weaker currency, prime residential prices are anticipated to increase by 4-5.9% during 2025.
Similar levels of growth are forecast for Madrid, Barcelona and Lisbon. In the Spanish cities, a significant portion of demand comes from foreign buyers with dollar-denominated savings looking to take advantage of a comparatively weaker euro. Lisbon’s positive momentum, supported by forecasts of further interest rate cuts, should also continue.
Also in this projected growth bracket is Cape Town, a market where confidence has recovered, economic activity has improved, and domestic and international demand is ongoing. Further interest rate relief and optimism in South Africa’s economic prospects for 2025 should underpin sales activity and growth in prices in the new year.
Taxes and tech
At the other end of the capital value growth spectrum, we expect a handful of cities to record negative capital value growth over the year. Cooling measures from governments, both proposed and implemented, in Singapore, China and the UK have slowed capital value growth.
In the UK, it’s likely that the abolition of ‘non-dom‘ status and an additional 2% stamp duty surcharge will result in further downward pressure on prices in the short term. However, the scale of falls will be limited by historical pricing, cuts to the Bank of England base rate and ongoing safe haven flows of wealth, given underlying geopolitical uncertainty. As such, we expect prime capital values in London to fall by approximately 2% in 2025.
Recent cooling measures in Singapore, which mainly targeted foreign buyers, along with economic challenges, have taken a toll on the prime sales market and lowered transaction numbers. Given lower levels of demand, the luxury residential market is expected to remain subdued. Although the city fringe and suburban areas are expected to perform well this year, demand for homes in prime areas is still expected to be lacklustre, given the lack of significant launches and ongoing cooling measures. Prices are forecast to dip for the prime locations between -1.9% and 0% for the year.
The tech hubs of Shenzhen and San Francisco are also expected to record slight declines (between 0% and -1.9%) in capital values over the course of 2025. Despite signs of stabilisation and growth in global tech markets, especially around generative AI and cloud computing, residential markets in these top tech locations haven’t yet shown green shoots.
Confidence and supply
Across the United States, the mortgage rate movements that heavily influenced the housing market in 2024 are destined to play a major role once again this year. A late-summer dip in rates gave home sales a second-half boost, as buyers and sellers took advantage of lower rates and increased confidence levels. In a market dominated by the 30-year fixed-rate mortgage, movements in either direction can have outsized impacts on prices and transactions, even in the typically less mortgage-reliant prime residential market.
Capital value growth across the four US markets in the World Cities Index should average 0.7% over the course of 2025, with Miami expected to lead the pack (2.5%), followed by New York City (0%), and Los Angeles (- 0% to 1.9%). Although supply is likely to remain low compared to historical levels, it should improve in 2025. Mortgage rates are also forecast to continue to fall during the year, but only moderately, leading to an additional boost to confidence.
Growth drivers
Savills World Cities prime residential forecasts
Source: Savills Research
