Sydney’s prime residential market has remained resilient in the face of the global pandemic, with price growth predictions in 2021 higher than the global average, according to Knight Frank’s latest research.
Prime property sales are already back to pre-pandemic levels in Sydney, with the city’s prestige property forecast to enjoy further growth of 3 per cent next year, higher than the global average of 2 per cent.
Knight Frank’s Prime Global Forecast 2021 sees market analysts give prime price forecasts for 22 cities around the globe in 2021, as well as assessing future market drivers and risks.
Knight Frank’s Head of Residential Research Australia, Michelle Ciesielski said, “the top three key prime property market drivers for Sydney are the pandemic-fuelled domestic demand, supply shortage and low interest rates”.
“These will be balanced out by the risks identified in the report’s Risk Monitor – for Sydney prime property the biggest risks ahead are the global and local economic performance, travel restrictions and the government’s ongoing response to the pandemic,” she said.
Knight Frank’s Prime Global Forecast was undertaken in October, prior to Pfizer’s COVID vaccine announcement.
“The rollout of a vaccine would see travel restrictions ease and foreign buyer activity start to recover, pushing our forecasts for 2021 higher,” Ms Ciesielski said.
“In 2021, we expect 20 of the 22 global cities to see prices remain flat or increase, a reversal of the trend expected at the end of 2020, where nine cities are likely to close the year with lower prices.
“In 2020, prime prices across the 22 cities are, on average, expected to remain static, before rising by 2 per cent in 2021.
“While we experienced great challenges this year with COVID-19, our data shows that prime property markets around the world have remained largely resilient, and this has particularly been the case in Australia, with our biggest cities of Sydney and Melbourne continuing to see growth despite lockdowns.”
According to the report, three broad groups will emerge next year. Sydney, along with London, Paris, Madrid and Berlin are among those markets “where prime prices are expected to rebound, assisted by low interest rates, pent-up demand, tax holidays or because of firm market fundamentals”.
The other two markets to emerge will be those where the pandemic will have little impact on prime pricing, and the few markets that “unexpectedly saw activity surge in 2020 as residents looked to upgrade to larger properties with more outdoor space”.
Other main drivers for global prime property markets over the coming year include “key currency plays, buying opportunities for those impacted markets in 2020, tax changes and fiscal stimulus, while other risk factors include higher taxes, geopolitical crises, currency shifts, the balance of new luxury stock, stamp duty holidays and Brexit,” according to the report.
Knight Frank National Head of Residential, Shayne Harris said prime property sales were back to pre-pandemic levels in Sydney, while that was not yet the case in Melbourne.
“In Sydney, we are seeing a higher than expected volume of wealthy expats wishing to return home, which will grow the buyer pool for prime residential property as international travel restrictions ease over the coming months and years.
“Many of the wealthy population are considering expanding their property portfolios while the prime market records modest growth and low interest rates.
“As confidence continues to grow in the new year, we’re likely to see more prime properties listed and only a low number of new prime homes built, so this will underpin our forecast for Sydney prime prices.
“Although Melbourne is slowly easing out of lockdown, the city now lags behind other major Australian cities in the recovery of their prime property market, though there’s still the prospect of price growth by the end of 2021 with the wealthy considering their next move after an extended lockdown.
“The ongoing impact of a lack of overseas immigration and education investment will hamper residential development market growth and confidence.
“There have however been some exceptional new homes built in Melbourne recently, with more in the pipeline, so this will place pressure on the prime market given limited new wealth migrating to the city.”
The Knight Frank Prime Global Forecast defines prime property as: “the most desirable and most expensive property in a given location, generally defined as the top 5 per cent of each market, by value,” noting how prime markets often have “a significant international bias in terms of buyer profile”.