(Bloomberg) -- Southern European cities including Lisbon, Madrid and Athens saw strong growth in residential-property values in the first half of the year, as an ongoing supply crunch buoyed the high-end housing market.
Out of 30 cities analyzed by property firm Savills Plc, Lisbon notched the strongest capital-value growth in prime residential real estate, with a 4.2% gain, thanks largely to an influx of wealthy foreign buyers. Amsterdam, Madrid and Athens all saw increases of more than 3%, according to an index that tracks prime residential property in cities around the world.
The capital-value growth in these destinations far outstripped the 0.8% average recorded across all the cities in the Savills index, seen by Bloomberg News in advance of its publication.
As Europe faces a housing-supply crunch due to high construction costs and development challenges, Americans have become a key prospective buyer base in many Southern European cities. A comparatively strong dollar and growing interest in the regional lifestyle are drawing buyers from the US, Savills said in the report. The value of prime real estate in Dubai also ticked up, as the Middle Eastern hub continues to attract wealthy workers with lower taxes and luxury lifestyle offerings.
While confidence in the high-end property market has weathered broad downturns in many of the world’s biggest economies, some buyers are remaining cautious as they await clarity on interest rates.
In the US, persistently high interest rates have brought the country’s housing market to a crawl, Savills said. As many American homeowners take out 30-year, fixed-rate mortgages, few are willing to re-enter the housing market and risk increasing their monthly payments. Prime residential prices fell in three of the four US cities monitored in the first half of the year.
Rising Rents
Growth in the prime rental market continues to outstrip growth in sales markets around the world, Savills said. Supply constraints across many cities in Europe, the Middle East and Africa mean those looking to rent high-end property continue to face spiraling rents. No market in the EMEA region tracked in the index saw a drop in rental prices between December 2023 and June 2024.
“High interest rates continue to contribute to caution in the sales markets and are pushing more would-be buyers into the prime rental markets” said Kelcie Sellers, an associate director at Savills World Research. “We expect rents to continue to outperform capital values for the remainder of 2024 and in the medium term as supply continues to remain scarce in many world cities.”
Again, Lisbon led the pack, along with Dubai and Bangkok. Rents rose 7.5% in the Portuguese city over the first half of the year. Athens, Barcelona, Amsterdam, Berlin and Cape Town all saw prime rents rise by more than 3% over the first half of 2024, with Athens clocking an increase of 4.6% during the six-month period, the report showed. That was much higher than the average growth rate of 2.2% across the 30 cities tracked by Savills.
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