The property market in Dubai is set to top the global price charts this year as it continues to appeal to high-net-worth individuals (HNWIs).

However, soaring interest rates and ongoing headwinds may impact demand.

House prices throughout Dubai are set to rise by 6% to 7.9% in 2023, according to real estate consultancy Savills, the highest in the world. Yet Dubai’s capital value growth is lower than the 12.4% rise from 2022.

The pace of growth in Dubai will surpass Miami and Milan, where house prices are forecast to increase by around 4% to 5.9%, along with Cape Town and Rome, set to register a 2% to 3.9% rise in 2023, Zawya reports.

“Both cities (Dubai and Singapore) will continue to see sustained inflows of high-net-worth individuals; however, they are not immune to higher interest rates and wider economic headwinds,” according to the Savills report. 

The findings also showed the expected prime price growth in Dubai for 2023 “is rather muted” compared with last year. A slowdown is also forecast within the coming months in other markets.

“Overall, many of the prime residential world city markets are set for a slowdown in 2023 with an average price growth of 0.5% forecast across the 30 global cities monitored by Savills,” the report added.

In addition, interest rates have increased since last year as the US Federal Reserve introduced a series of rate hikes to curb red-hot inflation. In January, the UAE unveiled a 25 basis-point increase in overnight deposits. 

“Recessionary conditions, a higher interest rate environment and inflation will weigh on prime residential performance, although the second half of the year holds some potential for global economic growth,” said Paul Tostevin, Head of Savills World Research. 

“The forecast growth of 0.5% is some way down from the 3.2% we saw last year; however, the rarefied nature of prime residential, coupled with a lack of stock, will prevent a sharper slowdown,” he added.