Global boom in luxury property sales hit by higher interest rates

Higher interest rates are taking a bite out of the luxury property boom.

Residential sales above the $10 million mark fell 13% in the second quarter compared with a year earlier, according to a report by the real estate consultancy Knight Frank, which tracks purchases in 12 markets worldwide. Total sales in the 12 months through June dipped to just under $30 billion, compared with $40.7 billion in 2021. But that’s still well ahead of pre-pandemic sales of $18.6 billion in 2019. 

The outbreak of the coronavirus unleashed a surge of property sales by the ultra-wealthy seeking out larger estates and second homes with resortlike amenities. However, sales have started to cool, with higher interest rates across the globe affecting even the top slice of the real estate market. 

As foreign wealth continues to flood into the United Arab Emirates, Dubai ranked as the top city in terms of volume during the second quarter. Dubai saw $1.6 billion in total sales over $10 million during the period, compared with $797 million in the second quarter of 2022. New York saw the second-most with $1.1 billion in second-quarter sales, followed by London with $1 billion.

In the year ahead, most markets may also see a lack of supply weighing on sales, said Liam Bailey, Knight Frank's global head of research.

“A lack of new-development starts between 2020 and 2022 means a lean 2024 for new delivery, pointing to rising competition for available stock, which should act to put a floor under pricing,” he said. “The biggest constraint across a majority of markets in the near term is supply.”