Is buying a luxury home in Australia a worthwhile investment?

Is a luxury home in Australia likely to prove a good long-term investment? 

The answer is that it all depends on where it is, and if it’s in Sydney, the Gold Coast, Perth or Brisbane, it could well reap handsome dividends.

Global property consultancy Knight Frank’s latest Prime Global Cities Index has revealed that Sydney’s capital growth came in at a lofty number eight across the world this year, with a rise in value of 4.2 per cent over the 12 months to the end of September. 

Not far behind was the Gold Coast, at number 11 out of a total of 46 cities worldwide, with a 3.9 per cent 12-month jump, closely followed by Perth in 12th place with 3.8 per cent, and then Brisbane at 15th with 2.5 per cent. Only Melbourne showed a disappointing ranking, at 26th in the field with a 0.7 per cent price rise.

Top of the global list was the Philippine capital, Manila, with a mammoth 21.2 per cent growth, then Dubai at 15.9 per cent, Shanghai at 10.4 per cent, Mumbai at 6.5 per cent, Madrid 5.5 per cent, Stockholm 4.7 per cent and Seoul 4.5 per cent.   

“Each of the cities’ markets has its own underlying key drivers,” said Michelle Ciesielski, Knight Frank head of residential research. “The interest rate rises of the past two years have impacted the mainstream market, but we’ve seen the prestige markets, in most cases, continue positive growth. 

“In Sydney, we’re seeing a shortage of stock and a shortage of skilled workers in the professional space so a lot of companies are bringing people over, and it’s hard to find them rental accommodation, so they’ve having to purchase instead.”

That lack of supply is also being exacerbated by the trend in Sydney of people future-proofing their homes instead of selling and moving somewhere else, says Ben Collier of The Agency. 

“We’re seeing people adding internal lifts to their homes between the levels, so they can stay there longer, so the homes that would normally come onto the market aren’t any more,” he said. “Also, we’re now seeing an influx of Chinese buyers and they’re coming to areas that they weren’t traditionally looking at. So, luxury homes in Sydney will always be a good investment.”

On the Gold Coast, the prestige market is powering along too. Michael Kollosche of agency Kollosche says supply and demand factors there are also pushing up prices. 

“We have so many more people moving to the Gold Coast than we have properties available,” he said. “They can’t build more either, as they have no one with the skills to do it. So, as one of the fastest growing cities in the country, with a huge amount of infrastructure going in, prestige property there will remain a good investment long term.”

Perth is another good prospect, says Ciesielski, with similar population growth and a lot of newly arrived business executives and upsizers moving into luxury homes.  

Prime luxury homes will perform even better in the years ahead, the Knight Frank research predicts, with prestige prices forecast to rise generally across the country by 3 per cent by the end of 2023, 4 per cent in 2024 and 5 per cent in 2025.

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