select
|

Global Insight: Mainstream markets outperform prime in Sydney and Melbourne

(Article by Michelle Ciesielski)
 
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.

 
The value of prime (luxury) global residential property markets globally rose on average by 1.8% in 2015 according to the Knight Frank Prime International Residential Index (PIRI); similar to the 2% growth recorded a year earlier.
 
Ranking the top 100 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 factors explaining both cities’ stellar performances. Melbourne prime property was ranked 6th globally with prices growing 11.9% in 2015.
Price growth in the Sydney and Melbourne prime residential markets, although lagged, has 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%.

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. In late 2008 and the years following, the federal government introduced several fiscal stimulus packages, including an extension to the First Home Owners Grant. This resulted in a recovery of the mainstream market at a faster rate than the prime market in 2009 and into the first half of 2010.

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.

Across the past decade there has been limited new supply of prime residential properties built by global standard; especially within close proximity to the Sydney CBD and with uninterrupted harbour views. However, over the next 10 years, there are potentially three prime residential towers in the revamped Circular Quay precinct; within close proximity to the renovated Circular Quay wharves and the new Sydney Light Rail Terminal. There are another four towers in Barangaroo proposed, including part of the new Crown Casino.

In the pipeline for Melbourne city, One Queensbridge will accommodate high-end luxury with the most expensive apartments Melbourne has yet to experience, as well as Australia 108, which is now under construction. Both are well-positioned for vantage points along the Yarra River, and enjoy views of the CBD.
 
There continues to be limited new stock available at the high end of the market in prime locations – especially in Sydney – yet there is continued demand from foreign buyers not meeting the investment migrants’ criteria of the Significant and Premium Investment Visas. These foreign buyers must buy a ‘new’ property in order to comply with the federal government’s foreign investment regulation.
 
This demand for foreign buyers comes at a time when the purchasing power of the lower Australian dollar has been much stronger, notwithstanding a recent rally. Many foreign buyers have already seen success in other global cities after buying into new projects where new life has emerged in once obsolete inner-city areas; these buyers are now in a position to add a Sydney or Melbourne property to their global portfolio.

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.

Download the full report here: Australian Prime Residential Property Market Insight April 2016


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK