Knight Frank Prime Residential Review shows strong growth in Australia's top end despite a softening market

The average home owner may be concerned about how the local market is faring but according to a new report, certain sections of Australian property are maintaining their momentum.

The Knight Frank Australian Prime Residential Review, released today, has revealed that despite an overall softening of the market the top end is still barrelling ahead.

It found “prime property” – generally defined as the top 5 per cent of a market by value – tends to follow global wealth patterns rather than Australian income growth, and sales of properties above $3 million-plus had increased nationally every year since 2014.

Sydney “prime” prices rose 8.7 per cent over 2017, making it the 9th best performing city globally for growth, while Melbourne came in 10th, growing 8.3 per cent.

Brisbane and Perth also ranked for the first time, slotting in at 19th and 21st, with 3.6 per cent growth and 2.8 per cent growth respectively.

Sydney saw 1809 sales above $3 million in 2017, up 7.6 per cent on 2016. Melbourne saw 871 sales in 2017, which was 10.9 per cent lower.

Michelle Ciesielski, Head of Knight Frank Residential Research, said that despite a generally strong performance, certain segments of the prestige market had slowed down.

“In Sydney, despite a reasonably good result, the $5 million to $10 million price point saw lower growth in sales turnover than those in the $3 million to $5 million and $10 million-plus cohorts,” she said.

“In Melbourne, the $3 million to $5 million cohort eased the most across the prestige price bands, following exceptional growth between 2014 and 2015.”

• Related: Sydney, Melbourne in top 15
• Related: Demand from foreign buyers to surge
• Related: Where the ultra-wealthy splash their millions

Stock was hard to come by and downsizers were making their presence felt, looking for luxury properties – particularly new apartments – closer to the cities, she said.

Country weekenders also held appeal for buyers with deep pockets.

“We’re seeing more families buying in places like the Southern Highlands, either as a second or third home,” Ms Ciesielski said.

She added that expats returning from overseas often sought out homes close to the water, which helped drive demand in Sydney suburbs like Longueville, Clovelly and Manly.

Rebecca Allen, a senior buyers agent with PK Property Search in Sydney’s inner ring, said that she had seen buyers with more money to spend off the back off a better-performing economy.

“They might have been sitting on their hands,” she said. “But now they’re either trading up, or trading down and investing in other things.”

She agreed that the $3 million to $5 million bracket was strong, especially with downsizers trading in large family homes, as was the lure of the beach.

“We’ve done a lot of purchasing in Manly – it’s certainly been a hit spot. People of all ages see it as a destination area,” she said.

Simon Harrison, from Belle Property Lane Cove, said that the $3 million to $5 million bracket was strong in his area, but homes priced above that were also performing well.

He said the foreign buyers in his area had “all but gone”, and most of the sale he was seeing were to local families.

“They’re confident in the location, they’re not looking to move,” he said. “Obviously the lending has tightened up a bit – possibly buyers at that price point are less reliant on funding.”

Mark Fletcher, from Fletcher’s Real Estate Canterbury in Melbourne, said that while there were still some ‘phenomenal’ results, there had definitely been an adjustment in the high-end market, with the drop off in foreign buyers being a factor.

“There’s been a few homes in Surrey Hills that have been resold from their 2015 sales”, he said “They are basically selling for those sale prices, or just a little bit lower.”

Mr Fletcher added that there were still good sales in the mid $2 million to 3 million price bracket, and over $7 million there were housing earning great figures.

“We’re not really seeing that market disappear”, he explained.

How many wealthy buyers are there?

Australia saw an increase of ultra-wealthy individuals  – someone whose net assets are worth $US50 million ($67.7 million) – with the number up 9 per cent over 2017, to 1260 people.

There are 39,280 individuals with net assets above $5 million, also up 9 per cent, and 10,000 people with a net worth of more than $US1 million migrated to Australia in 2017, according to the New World Wealth. Australia posted the biggest inflow of High Net Worth Individuals for the third year running.

Australia also ranks third in the top five countries to move to for Ultra High Net Worth Individuals (a net worth of over $US30 million excluding their primary residence) considering emigration.