Real Estate Markets, FDI, and the Cities That Attract Global Capital 

Real estate has remained a core allocation in family office and HNWI portfolios, and its role has only grown more central in recent years. Investors increasingly treat it not as a passive hedge, but as an active return driver that combines income, capital appreciation, and geographic diversification. As the briefing shows, the academic and industry case for this positioning is well established. Less examined is where, specifically, sophisticated cross-border capital is concentrating.  

This briefing addresses that question directly by examining structural and policy-responsive drivers. The framework’s contribution is to treat these two driver types as analytically distinct yet operationally linked. Structural drivers determine which markets attract capital in the first place. Policy-responsive drivers determine the speed, volume, and submarket concentration with which that capital arrives. 

The briefing examines ten city markets and creates and illustrative sample of cities selected for their sustained presence in cross-border investment flow data and their coverage of distinct market types, spanning established gateway cities, high-growth destinations, and European markets where structural demand and policy-responsive capital have recently intersected.  

The analysis draws on capital appreciation data, transaction volumes, foreign buyer activity, and program reform events across the 2020 to 2024 period to assess how each driver type has shaped market outcomes in practice. 

Real estate occupies a distinctive position among investable assets. Unlike equities or bonds, it generates income through rents, appreciates value over time, and maintains a degree of resilience during inflationary periods that purely financial instruments often cannot match.  

This combination of current yield, long-run capital growth, and inflation responsiveness is difficult to replicate within a single asset class, and it underpins real estate’s enduring role as a foundational allocation in sophisticated portfolios.  

A landmark study of long-run returns across 16 advanced economies found that over nearly 150 years, residential real estate and equities have delivered comparable total returns, averaging around 7% per annum in real terms, but real estate has done so with considerably lower volatility and less sensitivity to the business cycle (Jordà et al., 2019). That risk-adjusted profile is what distinguishes real estate from most other alternative allocations, and why it retains a structural role in portfolios even when short-term market conditions shift. 

The academic case for including real estate in a mixed-asset portfolio is well established and has only strengthened in recent years. A study examining real estate exchange-traded notes (ETNs) across the US, UK, France, and Germany from 1996 to 2009 finds consistent diversification benefits from including real estate in mixed portfolios across multiple allocation strategies, with the primary source of gains being risk reduction relative to stock and bond portfolios – benefits that become particularly pronounced during periods of economic stress (Günther et al., 2022). 

More recent analysis confirms that this holds across most interest rate environments. Lee (2026), examining US unlisted real estate returns across seven distinct rate phases from 1999 to 2024, finds that sector-specific real estate consistently added value in institutional mixed-asset portfolios through stronger downside risk-adjusted returns relative to bonds and stocks, with allocations averaging 9.5% during rate-easing phases and 7.5% during rate-tightening phases. The notable exception was the 2022–2024 tightening cycle, during which the fastest rate increases in 35 years triggered broad real estate devaluations and effectively crowded out unlisted allocations. Thus, real estate’s diversification role is durable across normal rate cycles, but sensitive to the pace of monetary tightening. 

Industry data reflects the closing of that gap. The UBS Global Family Office Report 2025, drawing on 317 single family offices with an average AUM of $1.1 billion, documents continued strategic allocations to real estate across all regions in 2024, while noting explicitly that performance prospects depend on local market condition. This is a qualifier that explains the wide regional variation observed (UBS, 2025). US family offices allocated 18% of portfolios to real estate, and Middle Eastern portfolios 14%, while other regions clustered around lower averages. Beyond allocation weights, the direction of capital flows is that HNWIs and family offices have been the largest buyers of global commercial real estate for five consecutive years, deploying $464 billion in 2025 (Knight Frank, 2026). 

The scale of cross-border capital deployment documented above does not distribute randomly across markets. As the literature reviewed here establishes, real estate performance diverges significantly by location shaped by local market conditions, interest rate environments, and the structural characteristics of individual submarkets rather than asset class dynamics alone.  

Broader FDI Landscape 

The broader FDI picture provides context. Global FDI flows declined from 2022 through 2023 amid overlapping geopolitical and economic pressures. Headline FDI rose 4% to $1.5 trillion in 2024, but this increase was driven by volatile financial conduit flows through several European economies; UNCTAD’s underlying, conduit-adjusted measure instead fell 11%, marking a second consecutive annual decline (UNCTAD, 2023, 2025). 

Figure 1. FDI Inflows Across the World 

The FDI data above establishes the macro context: aggregate cross-border flows remain under pressure and increasingly selective, which makes the question of where capital does concentrate more pointed, not less. The driver framework below explains the mechanism behind that concentration.  

Structural drivers: Structural drivers set the terms of market entry: depth and liquidity, legal certainty of ownership, currency and political risk, and supply constraints. They evolve slowly, reflecting underlying market architecture, though currency is a partial exception given its capacity for rapid movement. Yield is best understood as downstream of these conditions, an output that signals whether prevailing prices remain justified rather than an input in its own right. 

Policy-responsive drivers: These drivers govern timing and concentration rather than market eligibility. Investment migration programs establish a residency-linked demand channel; reforms or closures redirect that channel without eliminating it. Ownership restrictions and tax measures operate inversely, constraining rather than attracting foreign demand. Each is discrete, traceable to a specific decision, and reversible, though ownership restrictions can converge with the legal framework when a reform redefines who may purchase at all. 

Global Real Estate Value 

The fundamental and policy-responsive drivers identified above do not operate uniformly across global real estate markets; they rather concentrate.  

The question, then, is where. 

Globally, real estate deal value reached $873 billion in 2025, up 12% year on year, with capital concentrating on more targeted opportunities and larger average ticket sizes rather than dispersing across a broader set of markets (McKinsey, 2026).  

Figure 2. Prime Residential Capital Appreciation, 2020–2024 

The chart shows how home values changed across ten major cities between 2020 and 2024. It focuses on property price growth only and does not include rental income, taxes, or buying and selling costs. Athens is based on data for the wider apartment market rather than the luxury segment used for the other cities, while Lisbon covers 2021–2024 because earlier data was unavailable. 

Three cities stand out for the strongest price growth: Dubai (+173.7%), Tokyo (+65.5%), and Athens (+62.4%). Dubai’s rise reflects strong international demand and a sustained influx of wealthy buyers, visible in record transaction volumes at the prime end of the market, including more than 4,600 sales above AED 10 million in 2024 (Savills, 2025a). Tokyo benefited from a weaker yen, making property cheaper for foreign buyers, with total foreign real estate investment reaching JPY 2.3 trillion ($15.7 billion) in 2024 (Japan Living Life, 2026).  

At the other end of the scale, London and New York were the only cities to record overall price declines during this period. The remaining cities such as Paris, Sydney, Madrid, Singapore, and Lisbon, experienced steady but more moderate growth of around 14–23%. 

The table below categorizes each city on structural strength (a composite of economic depth, legal certainty, and supply constraint), policy-responsive exposure (the extent to which recent price and volume movement is attributable to a specific investment migration program, reform, or ownership restriction), the status of any migration channel, and the net five-year outcome discussed above.  

Each city gets a magnitude (Low/Medium/High/Very High depending on how much of its 5-year price move is policy vs. structural-driven) plus a direction tag showing which way policy cuts for foreign capital, either favorable, adverse, domestic policy only and currency/rate risk.  

The ten cities were selected for their presence across the cross-border investment benchmarks that track this kind of capital, including CBRE’s Global Real Estate Capital Flows report, Knight Frank’s Wealth Report and Prime Global Cities Index, and Savills’ Prime Residential World Cities Index, and for their coverage of distinct market types: established gateway cities, high-growth destinations, and European markets reshaped by investment migration reform. Not every city appears in every index; Athens in particular is included primarily as a case of investment-migration-driven demand rather than as a benchmark fixture. Together they provide a balanced view of where the capital is going, rather than a list built around any single report’s house view. 

Singapore functions as the control case in this sample: a structurally top-tier market in which policy operates to restrict foreign capital rather than attract it, in contrast to Dubai and Athens, where the policy-responsive layer works to draw capital in. 

London 

London draws international buyers from more than 50 countries into a deep, transparent, and legally secure market. What has changed is not the fundamentals but the policy environment.  

New York 

New York’s institutional depth is evident in its foreign investment activity, yet five-year price appreciation has been negative. The distinguishing feature is income rather than capital growth: prime yields well above the global average continue to draw cross-border capital even through flat price years. 

Paris 

Paris combines supply scarcity with enduring demand for premium addresses, a combination that has kept prime prices rising even as transaction volumes fall. This is a market defined by structural constraint rather than policy or demand shocks, and it rewards patience over speed. 

Tokyo 

Tokyo had the second-strongest appreciation in the sample, driven by a supply shortage and amplified by a weak yen that lowered the effective entry cost for foreign buyers. The market is fully open to foreign ownership, but its trajectory is closely tied to Bank of Japan monetary policy, making that the key variable to watch. 

Sydney 

Sydney delivered the strongest returns of any city outside the top three, despite having the most restrictive foreign-ownership rules in this sample. The market quality is not in question; the constraint is access, with foreign capital increasingly channeled into new-build and commercial assets. 

Dubai 

Dubai recorded the highest appreciation in the sample by a wide margin, combining rapid population growth with an open and tax-light policy regime. A large share of its recent gains is policy-responsive, but the underlying demographic trajectory gives the structural case real durability. 

Singapore 

Foreign transaction share collapsed under successive stamp duty hikes, yet prices held over the five-year period, showing that domestic and non-restricted capital is carrying the market. This makes Singapore the control case in the sample: a structurally strong market where policy works to restrict foreign capital rather than attract it. 

Madrid 

Spain’s Golden Visa was officially discontinued in 2025, yet foreign purchases nationally reached a record that year and Madrid still posted positive five-year appreciation, showing that a national program closure did not remove foreign demand. The more consequential risk for Madrid is local rather than national, centered on new restrictions targeting short-term rental income in the city. 

Lisbon 

Lisbon is the clearest case in the sample where removing a residency-linked channel did not remove underlying demand, because the structural driver behind that demand never went away. Chronic undersupply, not the Golden Visa, is the more durable explanation for its continued foreign investment. 

Athens 

Threshold-driven demand held strong through 2024, then fell 24% year on year once the transition period ended. Athens is the clearest case of a lagged policy effect in the sample, distinct from the outright program closures seen in Lisbon and Madrid. 

Comparative Insights 

• Program removal does not equal demand removal, though timing matters. Portugal, Spain, and Greece, the three European markets that underwent significant policy changes between 2023 and 2025, all recorded sustained foreign buyer activity through the point of reform. Portugal and Spain, which removed the real estate route from their golden visa programs, saw demand hold through the reform year itself. Greece is a more complex case: it raised its investment threshold rather than closing the program, and demand held through 2024 largely because a transitional window allowed investors to qualify at the previous threshold. Once that window closed in April 2025, real estate FDI fell 24% year on year (Greek City Times, 2025). The evidence suggests that investment migration programs amplify existing foreign demand rather than create it. It also suggests that reform design matters: whether a route is closed outright or repriced with a transition period shapes whether that resilience holds or eventually gives way. 

• The strongest-performing markets over the past five years are not necessarily the deepest institutional markets. Dubai (+173.7%), Tokyo (+65.5%), and Athens (+62.4%) significantly outperformed London (-5.2%) and New York (-2.6%) between 2020 and 2024. What these markets share is constrained supply combined with market-specific advantages: favorable currency dynamics in Tokyo, investment migration incentives in Dubai and Athens. This suggests that the drivers of outperformance in the current cycle differ from those that traditionally define institutional-grade investment markets. 

• The regulatory environment has become a decisive differentiator between otherwise comparable markets. London, Sydney, and Singapore are considered among the world’s transparent and institutionally mature real estate markets, yet each has introduced significant measures affecting foreign buyers in recent years, including stamp duty surcharges, ownership restrictions, and tax reforms. Institutional maturity, in other words, no longer guarantees openness to foreign capital; the two move independently.

Other interesting cases worth exploring are these three markets outside the ten-city sample, each testing the framework differently. 

Miami reached 80.3% five-year growth to Q2 2025, and Seoul reached 80.9%, both from the same Knight Frank index behind Figure 2, trailing only Tokyo and Dubai (Knight Frank, 2025b). Miami’s risk is structural rather than policy-driven: the same growth that drew capital in now sits alongside condo insurance premiums that rose 102% over three years (Urban Land Institute, 2024), a pressure absent from the original ten. Seoul’s case mirrors Athens. It also posted the fastest annual growth of any city tracked that quarter (DM Properties Marbella, 2025), and within weeks that growth met restriction: effective August 26, 2025, the Seoul metropolitan area became a foreign land transaction permit zone, requiring approval and two years’ residency before a foreign buyer could close (IMI Daily, 2025). Athens took roughly a year to show that same growth-then-restriction sequence; Seoul compressed it into a single quarter. 

São Paulo marks a third pattern: institutional capital moving in through a channel that is not linked to a residency program. Canada’s largest pension fund, CPP Investments, committed R$1.7 billion alongside Cyrela, Brazil’s largest homebuilder, to a São Paulo luxury residential venture in January 2025, targeting R$6 billion in sales (CPP Investments, 2025), building on a multifamily partnership the two have run since 2019. That capital sits in a market where the prime segment above R$3 million has grown at a 21.7% compound annual rate since 2023, roughly ten times the city-wide average near 2% (The Rio Times, 2026). This particular example is not tied to a residency channel or a policy, a genuinely different kind of capital from the policy-responsive layer this briefing otherwise tracks. 

The city profiles point to a pattern: in markets where investment migration programs have been active, most clearly Athens, Lisbon, Dubai, and Madrid in the years before its Golden Visa’s real estate route closure, foreign capital behaves differently from the broader FDI baseline. It concentrates on specific price bands, responds to program thresholds rather than yield signals, and redistributes when policy conditions change. 

This capital functions as its own demand layer: policy-responsive, geographically concentrated, and easier to trace than most cross-border flows. The 2022–2025 reform cycle is a useful test case. When Portugal and Spain removed RE option from their residence programs, foreign demand held broadly stable rather than exiting the system. Greece’s experience adds nuance to that finding rather than contradicting it: a threshold increase with a transitional grace period produced resilient demand through 2024, followed by a documented 24% decline in early 2025 once the grace period lapsed (Greek City Times, 2025). This suggests that the mechanism of a reform, and its timing, matter as much as its direction. In all three markets, foreign demand remained heavily concentrated in a handful of provinces and submarkets, which is reason to keep monitoring the program landscape, including how transition periods are designed, alongside conventional market indicators as a leading signal of where foreign real estate demand concentrates next. 

Read forward, the framework suggests structural pressure is likely to concentrate in markets where supply constraints are already binding, Paris, Lisbon, and Dubai among them, where continued scarcity or population growth may keep testing the pace of new supply.  

Policy-responsive pressure appears concentrated in the opposite direction: Sydney, Singapore, and London all carry now-enacted foreign-buyer measures whose durability, rather than their existence, is the more open question, while Athens and Madrid suggest that a program’s design and timing, not only its direction, can continue to shape demand well after the reform itself. On this reading, the markets most exposed to change over the next two to three years may be those where the two driver types interact, rather than where either operates in isolation. 

This briefing applied a structural and policy-responsive framework across ten hotspot cities to identify where cross-border capital concentrates and why. Three findings extend beyond the patterns already identified above. 

First, the price effect of policy-responsive measures is conditional on the foreign share of total demand. In Sydney and Singapore, the two markets carrying the most restrictive foreign-buyer measures in the sample, prices continued to rise because domestic and non-restricted capital account for the majority of transactions; the restrictions redirected foreign demand into new-build, commercial, or fund structures rather than suppressing the market. Where foreign capital represents a smaller share of total demand, policy measures should be expected to reshape the composition of investment before they visibly affect price. 

Second, capital appreciation alone is an insufficient basis for assessing market performance. New York scores ninth of ten cities on five-year price growth, yet its prime yields sit near double the global average, indicating that investor return has shifted from capital growth to income rather than disappeared. A scoring built on appreciation alone would misread this shift as underperformance. 

Third, investment migration functions as a distinct capital layer rather than a proxy for broader foreign investment. Demand tied to residency thresholds is traceable through application data, concentrates on specific submarkets, and responds to program design rather than yield. This makes program activity, thresholds, and reform timing a useful indicator of where foreign real estate demand is likely to concentrate next 

Together, these findings indicate that no single indicator, whether policy direction, appreciation, or program activity, is sufficient to assess a market in isolation. The cities identified in the outlook above, where structural and policy conditions are both in motion, are where this interaction is most likely to produce the next divergence between headline appreciation and underlying performance. 

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