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The ‘rightsizing’ boom is putting pressure on luxury supply

Sales of luxury apartments are booming and there are growing concerns that supply is going to get increasingly tight.

A new report from Frank Knight has highlighted that ‘rightsizers’ – those looking to downsize to luxury apartment living – are dominating activity in the top five per cent of Australia’s residential markets.

Frank Knight noted that in the first half of 2021, there were eight times the number of super-prime apartment sales ($10 million-plus) than the 10-year average.

Over the past five years, prices of these luxury apartments have risen by more than 30 per cent and with a lack of supply in the pipeline, some experts believe prices will continue to trend higher.

Over the past few years, new supply has dropped by 39 per cent thanks to a slow down in both construction and sales, during the initial stages of COVID-19.

This will mostly be felt in Brisbane and Sydney, while Perth and the Gold Coast will see some new supply to ease pressure in their cities.

Frank Knight reported there were three trends behind the surge in demand in recent months.

The first, was Australians seeking a low-maintenance, high-quality home environment with house-like proportions for entertaining.

Second, are buyers seeking a secured luxury apartment that could be easily locked-up and cared for when they jetted-off for long periods of international travel again next year.

Third is the emerging trend from the pandemic, of Australians who had embraced the concept of a co-primary home, where the second (holiday) home was almost equal to their main residence.

Knight Frank’s Head of Residential Research, Michelle Ciesielski, said demand had remained robust thorough the pandemic, while supply hadn’t kept up.

“Rightsizers have remained active in the Australian property market over the past year, with prestige sales data highlighting the continually increasing appetite of buyers for both primary and secondary homes,” Ms Ciesielski said.

“Though these Australians are prepared to spend what it takes to fulfil their rightsizing requirements, the widening gap between this buyer demand and appropriate property supply remains concerning, and residential construction difficulties continue to delay delivery of new product.

“The shortage of suitable product, particularly at the top end of the market where rightsizers play, has been exacerbated by developers unable to easily secure sites in prime locations adding to the highly pressurised buying environment across Australian cities.”

Over the past 18 months, there has been a move towards freestanding homes and away from units as people looked for more space and the ability to work from home.

Ms Ciesielski believes that in the upper end of the market, there was also a move towards owning multiple properties that served different purposes.

 “Although the pandemic encouraged standalone prime house price performance to overtake the apartment market, it also accelerated the concept of the co-primary home,” she said.

For many rightsizers in the prime residential market, they are seeking a bolthole in the city in preparation for business activity returning to the office environment, while also taking residence in their country and coastal second homes.

“Over the coming years, we will see increasing numbers of rightsizers who are seeking a low maintenance home as their main residence, given the transient global lifestyle that will return for many of the ultra-wealthy population,” Ms Ciesielski said.

“This pent-up demand will continue whilst we know new luxury apartment delivery and sales listings remain shallow across almost every prime region of Australia.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.