The resilience of prime residential markets was highlighted over the second half of 2020. Savills World Cities Prime Residential Index recorded an average capital value increase of 0.8% for the cities in the index at a time when global GDP was recovering from the impact of covid-19 and subsequent lockdowns.

The positive capital value growth recorded in the second half of 2020 was large enough to more than offset the 0.3% decline seen in the first half of the year, leaving annual growth at +0.5% for 2020.

This turnaround coincided with activity returning to residential markets around the world as lockdown measures were loosened. Bolstered by stimulus measures, low interest rates and demand for properties with more space, many residential markets experienced a robust recovery in demand.

Some of the strongest performers over the last year were cities where effective management of the virus allowed economic activity to be comparatively less impacted, such as Seoul, Hangzhou and Berlin. Supply and demand dynamics, however, also remained an ever-important driver.

Rental values and yields

The prime rental market on average fared worse during 2020 compared with the purchaser market. Demand for prime residential rental properties is often more international and from corporate tenants, and travel restrictions hindered these sources of demand. A fall in tourism has also led to many rental properties previously on the short-let market being added to supply.