Global prime residential prices rose 2.5% over the 12 months ending September 2025, marking a continuation of a two-year slowdown in luxury housing growth, according to Knight Frank.
The deceleration reflects broader macroeconomic pressures, including elevated interest rates and a slowdown in the pace of rate cuts. In September 2024, 43% of 37 sampled central banks had trimmed rates, but by April 2025 that figure had fallen to just 14%, Knight Frank noted. Although more rate reductions have been introduced in recent months, their effects on housing markets are expected to emerge gradually.
“Prime house price growth has cooled to its slowest pace in two years, as a slowing pace of global rate cuts keeps a lid on performance across major cities,” said Liam Bailey, Knight Frank’s global head of research. “But with rates set to fall further in 2026, the groundwork for a rebound is building.”
Asia-Pacific Markets Diverge
Across the Asia-Pacific region, dynamics are highly uneven. Tokyo continues to outperform, with prices for existing homes climbing sharply as buyers turn away from increasingly expensive new-build properties. Limited supply, a weakened yen boosting foreign investment, and a more supportive political environment have pushed Tokyo’s prime residential values to record highs, with annual growth surpassing 50%.
Hong Kong is showing tentative signs of recovery. Rate cuts have eased financing conditions, encouraging both private and institutional investors back into the luxury market, where limited stock and previous price corrections are creating selective opportunities.
Mainland China, by contrast, remains subdued. Policy emphasis has shifted away from real estate toward high-tech and domestic consumption as engines of economic growth. With muted policy support, demand for top-tier luxury homes is expected to remain soft over the next nine to 12 months.
Mixed Performance in Australia
In Australia, prime residential markets are diverging by city. The Gold Coast and Perth are outperforming due to strong migration, relative affordability, and constrained supply. Sydney remains resilient, underpinned by deep demand and global appeal, though affordability limits further gains. Melbourne trails behind, held back by slower economic growth and tax policies dampening market sentiment.
Looking Ahead
Despite the slowdown, Knight Frank expects the global luxury housing market to regain momentum next year. Falling interest rates are anticipated to support price growth, though the recovery is likely to become firmly established only by the first quarter of 2026.
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