Southern European cities including Lisbon, Madrid and Athens recorded strong property value growth in the first half of the year, as the ongoing property supply crisis boosted the market for high-end homes.
According to the data from 30 cities, analyzed by real estate firm Savills Plc, Lisbon saw the strongest increase in capital value in prime residential properties, with a 4.2 percent gain, largely thanks to an influx of wealthy foreign buyers. Amsterdam, Madrid and Athens also saw increases of more than 3%, according to an index that tracks first home ownership in cities around the world.
Capital value growth in these destinations far outstripped the average of 0.8% recorded across all cities in the Savills index, Bloomberg News reveals before its publication.
Deficiencies in real estate
As Europe faces a suffocation in housing supply due to high construction costs and development challenges, Americans have become the main base of would-be buyers in many southern European cities, the report notes. A comparatively strong dollar and growing interest in the regional lifestyle are attracting buyers from the US, Savills said in its report. The value of prime properties in Dubai also rose as the Middle Eastern hub with lower taxes and the “promise” of ultra-luxurious living continues to attract wealthy workers.
It is worth noting, however, that while confidence in the high-end property market has outpaced the broader decline in many of the world’s largest economies, some buyers remain cautious as they await more clarity on the path of interest rates on both sides of the Atlantic.
In the US, persistently high interest rates have put the country’s housing market in a tug-of-war, the Savills report said. With many American homeowners taking out 30-year, fixed-rate mortgages, few are willing to re-enter the housing market and risk increasing their monthly payments. Core home prices fell in three of the four US cities tracked in the first half of the year.
Increase in rents
At the same time, the report’s authors highlight that growth in the prime rental market continues to outpace growth in sales markets around the world.
Supply constraints in many cities in Europe, the Middle East and Africa mean that those looking to rent high-end properties continue to face spiraling rent prices. No EMEA market tracked in the index saw a fall in rental prices between December 2023 and June 2024.
The protagonists in the increases
Again, Lisbon led the pack, along with Dubai and Bangkok. Rents rose 7.5% in the Portuguese city in the first half of the year. Athens, Barcelona, Amsterdam, Berlin and Cape Town all saw rents increase by more than 3% in the first half of 2024, with Athens seeing a 4.6% increase over the six-month period, according to the report .
These rates are more than double the average growth rate of 2.2% in the 30 cities monitored by Savills.
