LONDON: Luxury residential property bucked the trend of falling prices in 2023 and rose 3.1%, as double-digit gains in the likes of Manila and Dubai offset falls in New York and London, Knight Frank said on Wednesday.

A jump in borrowing costs, inflation and economic uncertainty hit property markets last year, causing a significant drop in transaction volumes.

That helped support prices of luxury properties, along with a rise in the portfolios of the rich as stock markets rebounded, according to property agents Knight Frank.

The Philippine capital, Manila, topped the list of 100 markets Knight Frank tracks, with prices jumping 26%, followed by Dubai at 15% and the Bahamas at 15%. Luxury prices in New York and London declined 2% in 2023 and are now 8% and 17% lower than their most recent peaks respectively, Knight Frank said in its flagship The Wealth Report.

"As wealth portfolios recovered in 2023, affluent buyers targeted residential property in the world's luxury markets," Liam Bailey, global head of research at Knight Frank, said in a statement.

Kate Everett-Allen, head of international residential and country research, noted that while "the pandemic-fuelled property boom was set to end in tears as borrowing costs hit 15-year highs", there had been "a much softer landing" for prices.

Unlike residential markets, commercial real estate is having a tougher downturn, as the working from home trend pushes up vacancy rates and high borrowing costs hit the value of office blocks.

Global commercial real estate investment tumbled 46% in 2023 to $698 billion, driven by a pullback from U.S. investors, Knight Frank found.

Industrial and logistics beat offices to become the most invested sector for the first time on record, winning a share of a quarter of all global investment while the office market shrunk to a 22% share from 25% in 2022, Knight Frank said.

Private real estate investors, the most active buyers in 2023, look set to increase their buying activity in 2024 as they seek to take advantage of "dislocation" in the market, the London-based agents said. (Reporting by Tommy Reggiori Wilkes; Editing by Nick Macfie)