High Interest Rates Have Put the Brakes on Global Home Prices

As we make our way out of the first quarter of 2025, global housing markets are showing signs of cautious optimism. However, the pace of growth remains slow. Home prices across the world increased by just 2.6 percent annually in Q4 2024, well below the long-term average of 4.8 percent, according to a new report from Knight Frank. While this marks a slight uptick, the real momentum hinges on further interest rate cuts expected later in the year. 

“Global house prices are currently rising, albeit modestly,” says Liam Bailey, global head of research at Knight Frank. “The boost to growth from last year’s rate cuts has dissipated to an extent, and a further round of cuts is required to enable an increase in the current below-trend growth rate.” 

After a sharp rise in rates through 2022 and 2023, global house prices have struggled to regain their previous growth trajectory. Adjusted for inflation, prices have actually fallen by 3.6 percent since 2022—the largest decline since the financial crisis. The real challenge moving forward will be the balance between combating inflation and stimulating growth, especially in developed markets. 

Turkey has led the charge, with a 29.4 percent increase in annual home prices. However, when adjusted for inflation, real prices in Turkey have dropped by 10.4 percent, illustrating how price growth can be deceptive without factoring in inflation. Meanwhile, Europe has seen strong performances from Bulgaria, Poland, and Portugal, while China and Hong Kong have struggled, with declines exceeding 8 percent. 

Looking ahead, the expectation is that 2025 will bring more rate cuts, particularly in Europe and North America, which should help accelerate price growth in the second half of the year. While broader markets remain subdued, ultra-luxuryLuxuryA lifestyle defined by exceptional quality, craftsmanship, exclusivity, and sophistication, encompassing the finest products, services, and experiences that represent the highest standards of refinement and excellence.Go to Luxury Glossary real estate has bucked the trend. 

Super-prime residential markets—those where transactions exceed $10 million—are booming. According to Knight Frank, global super-prime sales surged 31 percent in Q4 2024, pushing total sales for the year to 2,018 units, a 6 percent increase from 2023. Even in markets facing challenges, such as London, Paris, and Geneva, luxuryLuxuryA lifestyle defined by exceptional quality, craftsmanship, exclusivity, and sophistication, encompassing the finest products, services, and experiences that represent the highest standards of refinement and excellence.Go to Luxury Glossary buyers are still snapping up high-end properties. 

Ultra-luxuryLuxuryA lifestyle defined by exceptional quality, craftsmanship, exclusivity, and sophistication, encompassing the finest products, services, and experiences that represent the highest standards of refinement and excellence.Go to Luxury Glossary homes are fetching record prices, with the average sale price reaching $18 million globally. Hong Kong leads the pack with an average of $22.9 million per property, followed closely by London at $20.4 million. Meanwhile, markets like Paris and Dubai have seen average prices of $15.6 million and $15.9 million, respectively. Despite broader market hesitations, the ultra-luxury segment remains resilient, proving that demand for top-tier properties is still thriving—even in uncertain times.

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