RESIDENTIAL PROPERTY

Luxury residential prices defy headwinds

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DESPITE a slowing global economy and rising property taxes, luxury residential prices improved by 1.8% in 2019, according to Knight Frank.

Four Australian cities – Sydney (27), Melbourne (44), Gold Coast (55), Brisbane (57) – also made the top 60 in Knight Frank’s Prime International Residential Index (PIRI 100).

Head of residential research Australia Michelle Ciesielski said the average price rises of 1.8% were up from 1.3% in 2018 but down from the peak of 2.8% recorded in 2013.

“Despite record low interest rates and wealth growth continuing in most advanced economies, there were some factors preventing global price growth from reaching previous highs, including the slowing global economy, rising property taxes and in some cases, a surplus of luxury homes on the market.

“But global price growth is firmly on the way up, with a shift away from the moderating price growth that has prevailed since 2013. We found 78 of the 100 locations in PIRI registered flat or positive growth in 2019,” she added.

Sydney and Melbourne outperformed the global average.

Sydney was the top ranked city in Australia, coming in at number 27 with 3.7% annual growth, with Melbourne second at 44 (2.2% growth). The Gold Coast was ranked 55 (1.8%), Brisbane was ranked 57 (1.4%) and Perth came in at 63 (0.9%).

“In Australia, Sydney and Melbourne recorded growth above the global average, and Sydney is leading the five domestic markets with prices underpinned by constrained supply, a resilient stock market and three interest rate cuts in 2019.

“Arguably unrivalled for lifestyle, Sydney combines all the first-class amenities of a tier-one city with an outdoor lifestyle in a waterfront location,”

Australian cities included in Knight Frank’s PIRI 100:

City 2019 Ranking % Change

(Dec 2018 to Dec 2019)

2018 Ranking % Change (Dec 2017 to Dec 2018)
Sydney 27 3.7% 30 3.1%
Melbourne 44 2.2% 41 2.2%
Gold Coast (= with Verbier, Switzerland) 55= 1.8% 42 2.1%
Brisbane 57 1.4% 31 3.0%
Perth 63 -0.9% 42 2.1%

National head of residential Shayne Harris said demand for luxury property in Sydney has further strengthened, with demand growing and momentum building from 2019 into 2020.

“We know from The Knight Frank Attitudes Survey that one-third of Australian ultra-high-net individuals (UHNWIs) wealth portfolios are made up of their principal place of residence and second homes.

“16% of Australian UHNWIs are planning another residential home purchase and this doesn’t include those properties for investment purposes. The main reason for their next purchase will be led by upgrading the family’s main residence, downsizing or retirement and a new family home in a sunny location,”

Globally, 21% of UHNWIs are planning another home purchase in 2020, according to PIRI.

“When ranking the countries for the next purchase, Australia came in third place, behind the United Kingdom and the United States despite non-residents without an investor visa being restricted to new-build purchases only.

“Looking at relative values across the globe, you can essentially buy 50 sqm of prime luxury internal floorspace in Sydney with US$1 million, when compared to 21 sqm in Hong Kong or just 16 sqm in Monaco.

“Your US$1 million extends even further when buying in Melbourne (96 sqm), Perth (117 sqm), Brisbane (123 sqm) and 136 sqm on the Gold Coast.”

The sqm of luxury property US$1m will buy around the world:

City  How many sqm of prime property does US$1m* buy in key cities?
 Monaco                                       16
 Hong Kong                                       21
 London                                       30
 New York                                       32
 Singapore                                       36
 Geneva                                       38
 Los Angeles                                       39
 Paris                                       45
 Sydney                                       50
 Shanghai                                       58
 Tokyo                                       65
 Beijing                                       68
 Berlin                                       78
 Miami                                       90
 Melbourne                                       96
 Mumbai                                     102
 Istanbul                                     115
Perth^ 117
Brisbane^ 123
Gold Coast^ 136
 Dubai                                     155
 Cape Town                                     174
 Sao Paulo                                     202

Ciesielski said ongoing high demand for luxury residential property in both Sydney and Melbourne was expected to result in higher growth rates in prices next year.

“Both cities have performed better than expected over the past 12 months, exceeding expectations for prime residential price growth, with Sydney’s actual growth of 3.7% almost double the forecast 2% and Melbourne’s growth of 2.2% more than double the forecast 1%.”

“Knight Frank’s The Wealth Report forecasts that Sydney luxury residential property prices will grow by 4% in 2020, while Melbourne will see growth of 3%. The other cities of Brisbane, Perth and the Gold Coast are forecast to see growth of 2% over this time.”

Globally European and Asian cities dominate the top 10 best performing locations. In Europe, Frankfurt (10.3%), Lisbon (9.6%), Athens (7.0%) and Berlin (6.5%). In Asia, Seoul (8.9%), Taipei (7.6%), Manila (6.5%) and Guangzhou (6.3%).

But gone are the days of 30% annual growth in China’s metropolises; Seoul and Taipei are now the region’s frontrunners with annual growth of almost 9% and 8% respectively.

The PIRI 100 – The top 10 performing markets

No. Location World Region Annual % change (Dec 2018 – Dec 2019
1  Frankfurt  Europe 10.3%
2  Lisbon  Europe 9.6%
3  Taipei  Asia 8.9%
4  Seoul  Asia 7.6%
5  Houston  North America 7.4%
6  Athens  Europe 7.0%
7  Mexico City  Latin America 6.6%
8 =  Manila  Asia 6.5%
8 =  Berlin  Europe 6.5%
10  Guangzhou  Asia 6.3%

All price changes are in local currency

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