According to a Knight Frank report, global prime residential property prices grew by 2.5% in the 12 months ending September 2025. This slowdown, which has been ongoing for two years, is directly related to overall macroeconomic pressures, primarily high interest rates and the slowing pace of their decline. While 43% of central banks out of 37 surveyed had begun to cut rates in September 2024, this share had fallen to 14% by April 2025. While new rate cuts have been observed in recent months, their impact on housing markets is expected to be gradual.
Liam Bailey, Head of Global Research at Knight Frank, notes: "Prime residential property price growth has slowed to its lowest level in two years, as the slowing pace of global rate cuts is holding back price growth in major cities. However, with further interest rate cuts expected in 2026, the foundations for a recovery are being laid."
The Asia-Pacific region is showing a mixed picture. Tokyo continues to post impressive results, with existing home prices soaring as buyers opt for the resale market over expensive new builds. Limited supply, a weaker yen spurring foreign investment, and a more favorable political environment have contributed to Tokyo's luxury home prices reaching a new record, exceeding 50% year-over-year growth.
Hong Kong, meanwhile, is showing early signs of recovery. Easier lending conditions thanks to lower interest rates have once again attracted both private and institutional investors to the luxury real estate market. Limited supply and previous price corrections in Hong Kong are creating selective investment opportunities. Hong Kong is showing encouraging preliminary signs of recovery in the luxury real estate market. Lower interest rates have facilitated easier financing conditions, which in turn has attracted both private and institutional investors. These players are showing increased interest in the luxury housing segment, where limited supply and previous price corrections are creating attractive, selective investment opportunities.
Meanwhile, mainland China continues to demonstrate sluggish growth. Government policy has shifted, with the emphasis now shifting from the real estate sector to the high-tech industry and domestic consumption as the main drivers of economic growth. With such cautious government support for the real estate sector, demand for luxury housing is expected to remain subdued for the next nine to twelve months.
The Australian luxury real estate market is showing mixed results. Different cities across the country are showing different results: the Gold Coast and Perth are showing positive growth, driven by active migration, relative housing affordability, and limited supply. Sydney remains resilient thanks to strong demand and global appeal, but housing affordability there limits potential for further growth. Melbourne, on the other hand, is lagging, suffering the negative impact of slowing economic growth and tax policies, which are dampening overall market optimism.
Regarding the future outlook, despite the observed slowdown, Knight Frank predicts that the global luxury real estate market will resume its growth momentum next year. Lower interest rates are expected to support price growth, although a full market recovery is unlikely to be fully realized until the first quarter of 2026.