'We’re seeing a lot of activity': What the early signs reveal about the prestige spring market

Economic headwinds sweeping the world are failing to dent the prestige property market, with prices in most Australian capital cities showing growth over the past year and projections the rate will increase over 2020.

“There’s still a difference between the mainstream market, which fell into negative territory, and the prime market,” says Knight Frank research director Michelle Ciesielski.

“The prime market has really held up, being less reliant on funding and now, in spring, we’re seeing a lot of activity. There’s a lot more confidence now post-election and with interest rate cuts, and that’s flowing into prestige property,” he adds.

Sydney’s prime market prices grew by 2.5 per cent over the past year, and are expected to advance 3 per cent over 2020, Melbourne’s are up 2.1 per cent, Brisbane 2.2 per cent and the Gold Coast 1.1 per cent, says Ciesielski.

Her optimism is supported by strong auction clearance rates for homes in high-end areas, according to Domain Group research analyst Eliza Owen.

“We’re seeing the property cycle moving back into an upswing in Sydney and Melbourne, and generally we see the higher end of the market moving first,” she says.

“So in Sydney, for instance, we saw the lower north shore with a rate of 80 per cent for August – compared to the general rate of 72 per cent – and in Melbourne’s inner east 77 per cent against the main 70 per cent. We’re also seeing more auctions happening, with volumes rising and less time on market.”

Brisbane and the Gold Coast prestige markets are still lagging behind, Owen says, but are expected to stabilise by the end of the year.

“We’re finding the prestige market is strong for good-quality property at the moment, especially in the $10 million to $15 million range,” Sydney agent Randall Kemp of Ray White Woollahra says.

It’s a confidence mirrored by Savills Victoria state director Clinton Baxter in Melbourne.

“There’s been a real uplift in confidence throughout the market, and particularly in prestige, over the past couple of months with strong auction results,” he says.

“Transactions are now occurring a lot more rapidly and FOMO [Fear of Missing Out] is kicking in, and the impact of social unrest in Hong Kong is being felt, with the uber-rich in Hong Kong and China looking at prestige property here.”

A record 26 per cent of global ultra-high net worth individuals are beginning to plan for emigration this year, according to Knight Frank’s latest Australian Prime Residential Review, with the preferred destinations the US, Canada, the UK and Australia.

In addition, an increasing population of uber-rich Australians is proving another key driver of the prestige market. Our ultra-wealthy population grew by 12 per cent over the past five years and is projected to grow by 20 per cent over the next five, according to the report.

The only major challenge is the level of uncertainty in the global environment, generated mainly by Brexit, Hong Kong and US President Donald Trump’s trade wars with China.

“That uncertainty means people don’t want to leave themselves too exposed with too much high-end property,” says Angie Zigomanis, senior manager at BIS Oxford Economics.

“The forecast for the next 12 months is that economic headwinds will still blow.”