Although prices for luxury residential real estate continue to rise around the world, in the largest cities of Spain, prices are growing much slower than the global market average, determined by the world’s largest megacities.
According to the latest report "World Cities Index for Premium residential real estate" published by the consulting company Savills, in the first half of 2022, the Spanish cities of Madrid and Barcelona showed the most restrained growth in both rental rates and premium property prices among other global markets.
The growth of rental rates and prices for housing in Madrid and Barcelona
The growth of rental rates of luxury housing from December 2021 to June 2022 amounted to 1.8%. For comparison, this is 0.3% higher than the increase in average prices for such real estate over the same period. Prices rose by 1.5%, and the cost per square meter reached €7,070. In Barcelona, the sale price of real estate increased by 1.4% over the same period to €6,530 per sq.m. On average, rental rates for premium offers increased by 1.5% over the same period.
It is worth noting the growth of the yield of such real estate for investors. The yield on the rental of premium real estate in the Catalan capital at the end of the second quarter of 2022 (June) reached 3.5%. In the Spanish capital, it was 3%, according to Savills. The company believes that this market segment will continue to grow in the second half of the year, but steadily.
In both cases, the growth was below the average of the 30 largest cities in the world included in the company's index and are international market leaders in the real estate sector. Rental of luxury housing increased by 3.1% on average worldwide, and the price to buy a home grew by 2.4%.
Cities with the highest prices and rental rates
The Savills report analyzes the development of the luxury real estate market in the 30 largest luxury real estate market cities in the world. In 90% of them, prices increased by an average of 2.4% between December 2021 and June 2022.
Most of all, luxury real estate has risen in price in Miami (USA) — by 12.5% in the first half of this year, reaching €12,400 per sq.m. Los Angeles and San Francisco are among the US cities with lower prices, except for Madrid and Barcelona, as well as cheaper destinations. In Los Angeles, prices for this period increased by 6.5% — €15,750 per sq.m. at the end of the second quarter. San Francisco grew by 5.5% — €16,040 per sq.m. at the end of the same period.
The list also includes cities that have shown a drop since December 2021. These are Shanghai (-0.9%, €18,800), Sydney (-1.7%, €16,760) and Hong Kong (-3%, €41,870). As you can see, despite the large drop in prices in these cities, the cost of their housing is impressively high. Especially in Hong Kong, which tops the ranking for the high value of premium real estate.
Savills claims that the international market was stable in the first half of 2022, despite many economic and international challenges. However, the growth was driven by the optimism of buyers and their haste amid rising interest rates. The market mood is fluctuating, and the coming months promise to test the real estate sector globally.
The consulting agency also expects growth to slow down in the second half of the year. According to forecasts, by the end of 2022, it will average 2.2%. Savills excludes that inflation and rising interest rates will affect buyers during this period. The elite segment is much less dependent on credit financing, attracting primarily wealthy buyers and investors.