Luxury housing market sees moderate growth in 2025

Knight Frank’s latest Prime International Residential Index (PIRI 100) reveals that global luxury residential property prices increased by 3.2% in 2025, a slight decrease from the 3.6% growth recorded in 2024.

Florence - Knight Frank

The index, which tracks 100 markets, showed price increases in 73 locations and declines in 24. Regional performance was diverse, with the Middle East, Latin America, and the Caribbean seeing strong growth. Asia-Pacific and Europe also performed well, while North America experienced a downturn, mainly due to weakness in Canadian markets.

Despite uncertainty, Europe's top-tier housing markets continued to attract global capital into prime and super-prime properties. Factors such as a weaker euro and four interest rate cuts by the European Central Bank made investments more appealing. The abolition of the UK’s non-dom tax regime also prompted wealth migration, with Italy, Monaco, and Switzerland proving particularly attractive.

Italy is emerging as a tax-advantaged destination, drawing international wealth with its flat-tax regime.

The global property market is currently undergoing significant changes. London, for example, saw a 4.7% decline in luxury property prices due to new tax regulations impacting wealthy residents, leading some to prefer renting over buying. This shift in capital is benefiting emerging luxury markets like Milan (0.4% growth) and Madrid (5% growth) as popular second-home destinations.

However, the real strength in the European luxury sector remains in established second-home destinations. Méribel (9% growth) and Marbella (8.1% growth) are experiencing strong demand, attracting buyers who prioritise properties for family retreats.

Established cities saw mixed results: Zurich and Frankfurt gained, while Paris saw a modest increase.

Spain and Portugal recorded some of Europe's strongest growth in 2025, supported by investment from Northern Europe, the US, and Latin America.

Switzerland's appeal as a stable haven grew due to policy shifts and geopolitical tensions, leading to healthy activity in resorts like Gstaad and Verbier.

Monaco reached record-high prices, though limited supply pushed some buyers to explore neighbouring coastal markets on the French Riviera.