Knight Frank's 2023 Wealth Report indicates a significant increase in prime residential property prices in Cape Town in 2022. The report highlights that Cape Town has climbed to 31st place from 94th place in the Prime International Residential Index (PIRI), which monitors luxury prices across the world's top residential markets. The PIRI revealed a 7.3% increase in Cape Town's prime residential prices. Despite experiencing the pandemic's impact as a third-world country, Cape Town's resilience has once again attracted both South Africans from other regions and foreign buyers seeking second homes and appreciating the city's lifestyle and value, according to Nick Gaertner, Director and COO of Knight Frank South Africa.
Dubai witnessed the largest increase in prime residential property prices with a 44.2% rise in 2022, cementing its status as a global hub for extreme-high-net-worth individuals with the assistance of several visa incentives. Aspen in the USA (27.6%), Riyadh in Saudi Arabia (25.0%), Tokyo in Japan (22.8%), and Miami in the USA (21.6%) completed the top five.
Monaco was the world's most expensive residential market, while Cape Town provided one of the most affordable luxury property markets globally, ranking behind only Sao Paulo in Brazil. Knight Frank used the "PIRI pagoda" to calculate how far $1 million would go in purchasing prime residential property, with Monaco offering a buyer only 17 square metres of property compared to Cape Town's 218 square metres.
South Africa has the most international prime residential marketplace in Africa, with the UK, Germany, Austria, France, the USA, Belgium, and Canada being the primary international buyers of prime property in South Africa.
Knight Frank notes that 2021 was an anomaly with stellar price growth as markets reopened post-Covid-19 and "revenge spending" took hold. Although the post-pandemic surge continues to push prices higher, luxury markets are not immune to significant interest rate increases. Price growth is expected to slow in 2023, but markets will deflate rather than collapse. The group warns that limited prime stock in several major cities worsened by the pandemic is putting a floor under luxury prices. As many countries, including South Africa, potentially pass their inflation peak, more attention will be paid to the resilience of the labour market.