According to the Prime Residential World Cities Index published by real estate services provider Savills, Dubai is well ahead of Mumbai, Cape Town and Bangkok in terms of average capital values across 30 cities in the first half of 2023.

According to forecasts for the second half of 2023, Dubai will also top the list with a growth rate of 6-7.9%.

"Dubai continues to perform well in the first half of 2023 and is well positioned for growth in the second half of the year - 1,500 units priced above Dh4,000 per square foot were sold across the city, a 67% increase compared to the first half of 2023," said Swapnil Pillai, Associate Director, Savills Middle East Research.

The study shows that the average capital value of the 30 cities tracked grew by an average of 1.1% in the first half of 2023, compared to a 0.8% increase in the second half of 2022.

The annualized growth rate through June 2023 was 1.9%, the slowest since December 2020.1 At the same time, average prime residential rents grew by 2.6%, outpacing capital values.

"The slowdown in the sales market recorded in the second half of last year has continued into 2023 amid rising interest rates and sluggish global economic growth.

Despite this, the average price of prime homes has remained positive and we are forecasting a 1.1% increase in capital values for the second half of the year," said Paul Tostevin, Director of Savills Global Research.

Paul Tostevin, Director of Global Research at Savills, said: "The limited availability of quality stock is also a factor and this scarcity is expected to continue.

Rising construction costs, development challenges and increasing debt costs are all contributing to the limited availability of quality stock and upward pressure on rental prices.

Dubai is fourth on the list of rental growth in the first half of 2023 with an increase of 5.4%, and since December 2020, average rents in Dubai's prime locations have risen by a whopping 62%.

Lisbon, Singapore and Berlin led rental growth in prime residential markets.

In the first half of the year, average gross yields in prime locations across the 30 markets stabilized at around 3%, with Dubai, Los Angeles and New York remaining the highest yielding cities at just under 5%.

"Despite the slowdown in the sales market in the second half of last year, we expect rents to continue to outperform capital values for the remainder of 2023 and into the medium term as supply continues to remain scarce in the face of growing demand," added Tostevin.