(Bloomberg) — The first half of the year brought strong growth in residential-property values to Southern European cities such as Lisbon, Madrid, and Athens. The high-end housing market was buoyed by an ongoing supply crunch.
In a study of 30 cities by property firm Savills Plc, Lisbon saw the strongest capital-value growth in prime residential real estate, with a 4.2% gain, largely due to an increase in wealthy foreign buyers. Amsterdam, Madrid, and Athens all experienced increases of over 3%, according to an index tracking prime residential property in cities worldwide.
These destinations far exceeded the 0.8% average capital-value growth recorded across all the cities in the Savills index. As high construction costs and development challenges contribute to a housing-supply crunch in Europe, Americans have emerged as a key prospective buyer base in many Southern European cities.
Meanwhile, prime real estate in Dubai also saw an uptick, driven by its appeal to wealthy workers seeking lower taxes and luxury lifestyle offerings. Confidence in the high-end property market has remained strong despite economic downturns in major economies worldwide, though some buyers are exercising caution amid uncertainty over interest rates.
In the US, persistently high interest rates have slowed the housing market, with prime residential prices falling in three of the four American cities monitored in the first half of the year. The prime rental market, however, continues to outperform sales markets globally, with rents in European, Middle Eastern, and African cities spiraling upward due to supply constraints.
According to Savills, high interest rates are driving more potential buyers into the prime rental market, with rents expected to outperform capital values for the rest of 2024. Lisbon, Dubai, and Bangkok led the way, with Lisbon seeing a 7.5% increase in rents over the first half of the year, outpacing the average growth rate of 2.2% across the 30 cities tracked by Savills.
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