Luxury residential property in Sydney is approximately twice as affordable as Monaco, Hong Kong and London, according to Knight Frank’s latest report, the Australian Prime Residential Property Market Insight – April 2016.
A study undertaken each year with the results of Knight Frank’s Prime International Residential Index (PIRI) determines the amount of luxury property, in square metres, that US$1 million will buy around the world.
The report has found that Monaco is tightest, covering only 17 sqm, followed by Hong Kong at 20 sqm and London with 22 sqm. In Sydney, close to double this size can be purchased, at 40 sqm (down from 41 sqm in 2014).
Melbourne is larger again, covering an area close to 116 sqm.
According to Knight Frank’s Director, Residential Research, Australia Michelle Ciesielski, the value of prime (luxury) global residential property markets globally rose on average by 1.8% in 2015.
“This was similar to the 2% growth recorded a year earlier. However, in 2015 over 66% of the PIRI 100 locations recorded flat or positive price growth, compared with 62% in 2014,” Ms Ciesielski said.
Ranking the top 25 cities in the PIRI 100, Vancouver leads the rankings by some margin, with prices accelerating 24.5% in 2015.
“Sydney follows in second place, with growth of 14.8%. Many comparisons can be drawn between the two cities – a lack of prime supply, coupled with foreign demand, spurred on by a weaker Canadian (and Australian) dollar are all factors explaining both cities’ stellar performances,” said Ms Ciesielski.
Ms Ciesielski said that prime residential property prices in Sydney rose 14.8% in 2015, while Melbourne prime property prices grew 11.9%.
“Knight Frank correctly predicted the Sydney and Melbourne prime residential property markets would outperform other global cities in 2015.”11
“Price growth in the Sydney and Melbourne prime residential markets, although lagged, have generally followed an upward trajectory in the Australian share market, when indexed to December 2008.”
“Post the Lehman’s collapse to December 2015, coming off a lower base, the Melbourne prime market recorded cumulative growth of 31% while prime Sydney prices grew by 30%.”
Ms Ciesielski said that when isolating performance since June 2012, Sydney prime prices grew 33%, compared to 27% in Melbourne.
“Since this time, the upswing in the share market, along with other stimulus such as favourable business conditions – and more recently a stable political environment – has renewed the confidence in the prime end of the market.
“Despite this vast capital growth in both prime markets over the seven-year period to December 2015, the broader mainstream market in Sydney and Melbourne significantly outperformed at 80% and 52% respectively.”
Looking forward, Knight Frank has analysed the annual prime residential price growth for 10 global cities in 2015 and forecast prices in 2016.
“Sydney prime is expected to remain the best performer, although the pace of price growth is expected to slow from close to 15% year-on-year in 2015 to 10% in 2016.”
“Melbourne prime is likely to see annual growth closer to 6%. Australia’s economic slowdown, uncertainty surrounding the Australian leadership with a federal election looming, weaker share market performance in the past 12 months and the new foreign investment fees explains the lower rate of growth likely in 2016,” Ms Ciesielski said.