H1 2025 prime residential growth

World cities capital value forecasts - H2 2025

The uncertainty from the financial and geopolitical environment has spilled over into the prime residential market in the first six months of the year. After a strong 2024, acceleration in price growth slowed from 2.2% for the full year to 0.7% in the first half of 2025.

Sales surge

Tokyo’s prime residential market continues to demonstrate strong momentum, underpinned by a persistent supply-demand imbalance. Capital values rose by 8.8% in H1 2025, bringing year-to-date growth to 16.3%. A chronic shortage of new stock, driven by elevated construction costs and labour constraints, has kept inventory levels tight. At the same time, demand remains resilient, particularly among affluent domestic and international buyers who appear largely unaffected by rising interest rates. Continued net migration into the capital further reinforces this demand base, with capital values expected to increase by a further 6% to 7.9% in the second half of the year.

Elsewhere, Berlin, Dubai and Seoul have each recorded capital value growth exceeding 5% in the first half of the year. In Berlin, constrained development activity continues to drive pricing. Dubai’s performance is supported by strong immigration flows and investor confidence, while in Seoul, recent regulatory easing has reignited interest in the prime segment. Across all three cities, robust demand is being met with limited new supply, something likely to persist through the remainder of the year, particularly as elevated construction costs and interest rates continue to suppress development pipelines. Seoul and Dubai are forecast to see capital values grow by at least an additional 4% in H2 2025.

City struggles

While 60% of the cities in the World Cities Index saw positive capital value growth in the first half of the year, many of the markets with price falls only recorded slight declines. Cities with negative price growth tended to be larger cities where residential property of all types can be more costly to obtain, such as London, Paris, Shanghai and Los Angeles.

In the United States, financial market volatility has led to a more cautious approach among both buyers and sellers in the luxury segment. High mortgage rates, elevated home prices and broader macroeconomic uncertainty have slowed the market across the US. While many prime buyers have significant equity and liquidity, the current environment has prompted a more measured pace of activity. Nevertheless, the limited availability of prime residential property—often with unique features and desirable locations—continues to support pricing, even in a slower transactional environment.

Chinese cities

In China, the government has taken a proactive stance in stabilising the real estate sector. A series of policy measures introduced since late 2024 have aimed to ease restrictions and improve market sentiment. These efforts have been particularly effective in the prime segment, where new launches have seen strong uptake and, in some cases, oversubscription. However, broader market demand remains subdued, and overall transaction volumes have declined. Should further stimulus be introduced in the second half of the year, the prime market is well-positioned to benefit, with both pricing and sales volumes likely to improve to varying degrees.

Hong Kong continues to face headwinds, with capital values falling by 3.5% in H1 2025. Despite this decline, the city remains the most expensive in the World Cities Index, with average prime prices of US$3,720 per square foot (€36,700 per square metre). Elevated pricing and ongoing policy uncertainty have contributed to a more subdued performance.

Lifestyle appeal

Cities with strong lifestyle appeal—such as Amsterdam, Cape Town, Lisbon and Sydney have demonstrated resilience in the face of macroeconomic headwinds. Each of these markets has reported positive capital value growth, supported by low levels of prime stock and sustained demand. The lifestyle-driven nature of these markets continues to attract buyers, many of whom are less sensitive to short-term economic fluctuations. This sustained level of demand is likely to support further price growth through the remainder of the year, with each market expected to see growth above 2% in H2 2025 and Cape Town forecast to grow by 6% or more.

Outlook

While 60% of cities in the World Cities Index recorded positive capital value growth in H1 2025, declines in the remaining markets were generally modest and concentrated in larger, more mature cities. As we move into the second half of the year, supply-side constraints, macroeconomic uncertainty and policy responses will continue to shape the trajectory of prime residential markets globally, but prices are expected to remain in positive growth territory with average capital value growth across the 30 cities at 1.5%.