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Byron Bay luxury property forecast to grow 35 per cent by 2027

Byron Bay has topped an international list of 12 hotspots tipped to record surging prime residential price growth.

Knight Frank’s The Wealth Report 2022 forecast property prices in the NSW coastal town would climb up to 35 per cent in the next five years.

Known for its pristine beaches and quiet coves, Byron Bay is popular with wealthy buyers, including Hollywood celebrities.

The town beat out other international hotspots including Knightsbridge, London, which has 25-30 per cent price growth forecast and Austin, Texas, which had 20-30 per cent growth tipped.

Knight Frank Australia Head of Residential Research, Michelle Ciesielski said the hotspots were evaluated based on income growth potential, health and wellbeing, education, tax, relative value and infrastructure.

Byron Bay had the strongest growth forecast due to the town’s health and wellbeing elements.

“There is always a lot of interest in which areas will emerge as the next in-demand global ‘hotspots’ for buying activity – and our forecast analysis has identified the top global hotspot for the ultra-wealthy as being Byron Bay, Australia,” Ms Ciesielski said.

“Our data shows Byron Bay having a price growth forecast of 30-35 per cent over the next five years, and competition for residential property here continues to intensify as Byron Bay’s environmentally-minded council has limited the number of new homes built over the past decade.

“In the past two years, we have seen substantial emphasis from ultra-wealthy buyers seeking homes with a significantly reduced impact on the environment. There is a growing, committed pool of buyers asking questions spanning energy efficiency, embodied carbon and the sustainability of materials.”

The report also showed ultra-wealthy Australians transferred their funds back to the nation’s biggest cities in 2021, which was a complete “boomerang” on what occurred in 2020.

Last year luxury homes emerged as the asset class of choice for ultra-high-net-worth-individuals (UHNWI) with 19 per cent globally buying a home.

In Australia, 31 per cent of UHNWI bought a residential home last year, second only behind Hong Kong, where 37 per cent did so.

The report also noted Australian cities recorded average prime price growth of 12.3 per cent in 2021.

All Australian cities in the Knight Frank Prime International Residential Index 100 exceeded the prime global price growth, with the Gold Coast ranking at number 12 globally, with 17.1 per cent growth.

Sydney came in at 17 with 16.2 per cent growth, while Brisbane finished at 29 with 11.2 per cent growth, Perth ranked 31 with 10.5 per cent growth and Melbourne came in at 39 with 9.4 per cent growth.

“There’s been much attention on the idea that COVID-19 triggered an ongoing trend of Australians leaving urban centres for regional areas,” Ms Ciesielski said.

“In fact, what we are now seeing is that ultra-wealthy Australians are transferring their wealth back to the cities whilst also investing in second homes.

“The use of second homes for longer periods was supercharged in 2021 as flexible working grew and homeowners looked to decamp for periods of time.”

Sydney has the strongest forecast in Australia for 2022 with 9 per cent growth predicted for the prime residential market. 

Worldwide, prime residential property grew 8.4 per cent in 2021, up from just under 2 per cent in 2020 – the highest annual increase since launching in 2008.

Ms Ciesielski expects demand for high-end property to continue with cities to see the most focus from buyers.

“In 2022, we will see the luxury housing boom endure, with more cross-border transactions as conditions return closer to pre-pandemic levels, and we are likely to continue to see demand for our cities grow,” she said.

“In Australia, 28 per cent of Australian UHNWI’s plan to buy a home in 2022 and we know 36 per cent of Australian UHNWIs are considering refinancing options in the next 12 months to capitalise on the current low interest rate environment.

“The top trends for the luxury property market in 2022 will be: persistent stock shortages in prime markets; ramped up taxes and cooling measures; and the further detachment of the super prime market of properties US $10 million plus.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.