Navigating the international residential market map in shifting economic sands
As interest rates stabilise, affordability is expected to improve, supporting renewed buyer confidence and transaction volumes in key markets
[SINGAPORE] Despite ongoing global economic uncertainties, international residential properties remain on the radar of investors, particularly in cities with strong economic fundamentals, stable governance, and sustained housing demand.
Markets with growing populations and supply-demand imbalances will likely see continued price appreciation, while cities with declining affordability may experience a shift towards rental demand.
In response, investors are increasingly turning to suburban markets, where housing remains more attainable, and rental yields remain attractive.
Technology and sustainability are also playing a larger role in shaping the future of residential real estate. Energy-efficient homes, smart developments, as well as properties that align with environmental, social and governance (ESG) principles are gaining favour among both buyers and investors.
Developers are responding by integrating green building materials, sustainable designs, and smart home technologies to meet evolving consumer expectations.
Rental markets are expected to remain strong, particularly in cities where housing supply is constrained. With higher borrowing costs and affordability concerns still present in some regions, the demand for rental properties will continue to rise, offering opportunities for investors seeking stable rental income.
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Fresh concern
In this evolving landscape, inflation is emerging as a fresh concern due to the latest trade tariffs, while the resulting turmoil in global stock markets may dampen sentiment.
Trade tensions and tariffs have long been a source of market uncertainty, and have already driven up costs for businesses and consumers. Imposition of tariffs on key materials such as steel and aluminium has increased construction costs, leading to higher property prices.
A strong economy with sustainable inflation is the ideal outcome for real estate markets. Over the past two years, inflation globally has remained stubbornly high. Although inflation levels had started to ease after a prolonged period of elevation, the current US regime’s tariff moves are raising the spectre of renewed inflationary pressures, which may continue to affect investor confidence and purchasing power.
A resilient economy, despite trade-related headwinds, will bode well for brick-and-mortar asset investments. However, declining gross domestic product growth, household income and employment in the aftermath of America’s “Liberation Day” may temper future market expansion.
While the US Federal Reserve has signalled a gradual reduction in rates and maintained a rate hold between 3 and 4 per cent, the European Central Bank, Swiss National Bank and Bank of England have already cut rates to 2.65 per cent, 0.25 per cent and 4.5 per cent, respectively, as at April 2025.
Traders are now pricing in four additional Fed rate cuts in 2025 to support economic growth in view of an impending slowdown and recession. These rate cuts are expected to improve liquidity in real estate markets.
Key investment destinations
United Kingdom
The UK remains a top real estate investment destination, with the Prime London area still a go-to for the globally wealthy. As interest rates begin their decline with the drop in mortgage rates – from highs of over 7 per cent to below 5 per cent – buying activity has improved with local buyers, particularly in the primary and secondary residential markets. Hotspots include:
Prime Central London: The cornerstone of London’s luxury property market, this sector holds strong heritage appeal, with sales recently improving and capital values stable after a period of low growth. Mayfair, South Kensington, St John’s Wood and Chelsea are well-known areas, with up-and-coming prestigious locations such as Westminster and Southbank exhibiting good capital growth. Kensington and Chelsea accounted for 64 per cent of all home sales of over £5 million (S$8.6 million) in the first half of 2024.
Birmingham: Ongoing regeneration projects, such as HS2 and Digbeth, are fuelling growth, with house prices expected to rise by 26.4 per cent between 2025 and 2029.
Cambridge: A thriving tech and academic hub with strong rental yields and consistent property appreciation. The city’s status as a knowledge hub continues to attract talent, boosting housing demand. Its population has also grown by 17.6 per cent in the last decade, resulting in high tenant demand.
Manchester: This Northern powerhouse continues to attract investors due to its strong rental demand and capital growth potential. The city’s industrial resurgence and ongoing urban development projects has made it a prime location for property investment.
London: The UK capital and global hub for finance, technology and education with a lot of potential. We have seen a recovery in the ultra-luxury market with renewed interest from ultra-high-net-worth individuals in prime locations such as Southbank and heritage-listed mansions. The rental market remains strong, particularly in zones with good transport connectivity.
Leeds: A growing financial and tech hub outside of London, this thriving city in Yorkshire offers strong long-term investment potential. The city’s continued expansion makes it a strong bet for long-term capital appreciation as well as good rental yields.
Australia
Australia remains an attractive investment destination due to its stable government policies, population growth, and housing undersupply. The Reserve Bank of Australia initiated its first rate-cut in February 2025 to 4.1 per cent, signalling the beginning of an easing cycle that is expected to support the housing and mortgage markets.
Sydney: A consistent leader in property appreciation, benefiting from infrastructure expansions and strong migration inflows. The continued demand for housing, particularly in the luxury sector, has kept prices resilient.
Perth: Experiencing rapid population growth and economic expansion driven by the mining sector. Government incentives and infrastructure developments make it an appealing market for investors seeking strong rental yields and capital appreciation. The city’s affordability, compared to Sydney and Melbourne, is attracting more investors.
United Arab Emirates / Dubai
Dubai’s residential property market is driven by strong economic growth, a favourable tax environment, and high rental yields. The kingdom has several high-performing residential areas, each catering to different investor profiles.
Luxury properties abound at Palm Jumeirah, Downtown Dubai and Jumeirah Bay Island. For high rental yield, look to Jumeirah Village Circle (JVC), Dubai Sports City and International City. Upcoming growth hubs are being developed in Dubai South, Al Furjan and Meydan, while those eyeing waterfront properties should consider Dubai Marina, Bluewaters Island and Port De La Mer. For an investment riding on the gaming and entertainment economy, there is Ras Al Khaimah.
Different strategies offer varied returns. Buy-to-let properties are yielding 5 to 9 per cent depending on location, while short-term rentals with an Airbnb model can give high return on investment in tourist-friendly areas like downtown Dubai and the Marina area.
Buying off-plan, meanwhile, allows for flexible payment plans with appreciation potential.
Dubai luxury properties have strong capital appreciation prospects, with premium properties appreciating by 10 to 20 per cent yearly.
Market growth will be driven by several factors that encourage investment and demand for housing in the emirate.
Dubai’s golden visa for investors gives residency for property investors with a minimum of two million dirham (S$720,000). The market holds a wide variety of homes for sale, from villas and townhouses to apartments.
There is rising demand for affordable housing, with Jumeirah Village Centre and Arjan gaining traction, as well as growing demand for green-certified buildings.
Investments in infrastructure and commitment to a tax-free regime and promoting tourism are also driving real estate demand and economic growth.
While it may be too early to accurately read the impact of trade tensions on global real estate markets, as interest rates stabilise, affordability is expected to improve, supporting renewed buyer confidence and transaction volumes in key markets.
The writer is senior director and head of international residential sales at Savills Singapore
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