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Melbourne and Sydney dominate luxury price growth

Luxury residential price growth in Australia is highest in Sydney and Melbourne, according to the results of the Prime International Residential Index (PIRI 100) in Knight Frank’s The Wealth Report 2020, released this week.

The PIRI 100, which tracked the movement of luxury residential prices in 100 cities and second home markets globally between December 2018 and December 2019, found four Australian cities were ranked in the top 60 for luxury residential market performance over the past year.

Sydney was the top ranked city in Australia, coming in at number 27 with 3.7 per cent annual growth, with Melbourne second at 44 (2.2 per cent growth).

The Gold Coast was ranked 55 (1.8 per cent), Brisbane was ranked 57 (1.4 per cent) and Perth came in at 63 (0.9 per cent).

According to Knight Frank’s Head of Residential Research Australia Michelle Ciesielski, globally, the 100 locations covered by Knight Frank’s Prime International Residential Index recorded average price rises of 1.8 per cent, up from 1.3 per cent in 2018, although down from the 2.8 per cent 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,” Ms Ciesielski said.

“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.

“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.”

Shayne Harris, who is National Head of Residential for Knight Frank, 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,” Mr Harris said.

“Sixteen per cent 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 per cent of UHNWIs are planning another home purchase in 2020.

“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 square metres of prime luxury internal floorspace in Sydney with US$1 million, when compared to 21 square metres in Hong Kong or just 16 square metres in Monaco. 

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

Ms 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 per cent almost double the forecast 2 per cent and Melbourne’s growth of 2.2 per cent more than double the forecast 1 per cent.

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

Globally, the PIRI 100 also revealed:

  • Cities dominate the fastest risers in Knight Frank’s PIRI 100, as opposed to second home markets 
  • European & Asian cities dominate the top 10 best performing locations in the PIRI 100. In Europe, Frankfurt (10.3 per cent), Lisbon (9.6 per cent), Athens (7.0 per cent) and Berlin (6.5 per cent). In Asia, Seoul (8.9 per cent), Taipei (7.6 per cent), Manila (6.5 per cent) and Guangzhou (6.3 per cent)
  • Gone are the days of 30 per cent annual growth in China’s metropolises; Seoul and Taipei are now the region’s frontrunners with annual growth of almost 9 per cent and 8 per cent respectively 
  • London registered a fall of 2.6 per cent in 2019. However, the Conservatives’ decisive victory in December’s general election provided some much-needed political clarity and the market looks set to gain traction in 2020
  • Monaco remains the world’s most expensive city, with $1 million buying just 16.4 square metres of accommodation – the equivalent of a bedroom. This is followed by Hong Kong and London.

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

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