Luxury housing markets across Europe are diverging sharply, with Alpine ski resorts, Mediterranean sunspots, and historic cultural capitals driving price growth while major financial centres lag. According to Knight Frank's Wealth Report 2026, more than half of the roughly 50 European cities tracked saw prime property prices rise by over 3% in 2025.
Prime properties — defined as the top 5% of each market by value — are increasingly influenced by wealth creation and international buyer demand. The report's Prime International Residential Index covers 100 cities globally, 47 of them in Europe.
Prague Tops European Rankings
Prague, the capital of Czechia, recorded the strongest growth among European cities, with prices rising 14.6% in 2025. This placed it fifth globally, behind Tokyo, Dubai, Manila, and Seoul. The city's historic centre and relatively affordable luxury segment compared to Western European capitals have attracted both domestic and international buyers.
Other European cities with notable gains include France's Méribel (9%), Portugal's Porto (8.5%), and Spain's Marbella (8.1%). The French ski resort of Courchevel 1850 rose 6.9%, while Italy's Florence (6.7%) and Lake Como (6.5%) also performed strongly. Switzerland's Gstaad (5.5%), Italy's Rome (5.5%), and Portugal's Quinta do Lago (5.2%) rounded out the top European performers.
The common thread among these winners is clear: lifestyle and resort destinations dominate. Alpine ski resorts, Portuguese golf retreats, and romantic cultural cities are outpacing traditional financial hubs.
London Leads Declines
Not all European cities shared in the boom. London recorded the steepest decline in Europe, with prime property prices falling 4.7% in 2025. The report attributes this to shifts in tax rules affecting wealthy residents, which have pushed budgets lower and encouraged some to consider renting rather than buying.
Ibiza, Jersey, and Lausanne also saw modest drops of between 1% and 2%. Among other European capitals, Madrid (5%), Oslo (4.2%), and Berlin (3.4%) posted solid gains. Growth was more modest in Lisbon (2.7%), Dublin (2.3%), Vienna (1.3%), Paris (1.3%), and Bucharest (0.4%). Stockholm saw a slight decline of 0.7%, while Edinburgh remained flat.
Major financial capitals — London, Stockholm, Paris, and Milan — are all lagging well behind resort markets, highlighting a shift in buyer preferences toward lifestyle-driven investments.
Global Context: Tokyo's Surge and Chinese Declines
Globally, Tokyo was the outlier, with prime property prices surging 58.5% in 2025, driven by scarcity of new-build apartments, low interest rates, and strong inward demand from Asia-Pacific. Dubai ranked second with a 25.1% rise, though the data predates recent geopolitical tensions in the Gulf.
At the other end of the spectrum, Chinese cities saw the steepest declines. Guangzhou fell 12.2%, followed by Shenzhen (7.2%), Shanghai (5%), and Beijing (4.9%). Canada's Toronto and Vancouver each dropped around 7%.
Liam Bailey, editor of The Wealth Report, noted: “In many markets, prime residential property has pulled away from the broader housing sector, underpinned by the strength of wealth creation. While mainstream markets remain exposed to wider economic pressures, the pace at which wealth is being generated is helping to keep demand for luxury property more resilient, even against recent volatility in debt costs.”
For travellers interested in exploring these luxury destinations, new vintage luxury train routes across Europe for 2026 offer an elegant way to visit cities like Prague, Florence, and Marbella.
The divergence between lifestyle destinations and financial capitals suggests that Europe's luxury housing market is increasingly shaped by wealth creation and international mobility, rather than local economic conditions alone. As the continent's prime property landscape evolves, buyers are voting with their wallets for places that offer quality of life over financial convenience.
