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While a global real estate agency revised growth estimates for Australia’s luxury market capital growth in 2023 on account of looming headwinds, it predicted that one capital city is poised for a golden year.
Values of prime properties, or real estate within the top 5 per cent of each capital city market by value, across the country are forecast to rise on average by 2 per cent next year, according to Knight Frank’s Prime Residential Forecast for 2023.
Although the figures are a reduction from the 2.7 per cent predicted six months ago, the amended estimates still exceeded the prime price growth recorded by the sector in six of the last 10 years.
Values of prime properties have declined or barely risen in several cities across Australia in the three months to September, according to Knight Frank’s Australian Prime Residential Review.
On a global scale, Dubai leads the prime price forecast for 2023, with a predicted 13.5 per cent annual growth.
The report — which tracks the prime prices of 25 global cities — revealed Sydney was rated among the top 5 cities for most likely home purchases in the next one to two years, thanks to extremely well-heeled individuals looking to buy into the city’s prime housing market.
The NSW capital only ranked behind London, New York, Dubai and Singapore as the most desirable city to purchase a property for ultra-high-net-worth individuals.
Michelle Ciesielski, the head of residential research at Knight Frank, said that while there are still headwinds that the city’s upper market tier faces, the outlook for Sydney’s prime housing market remains positive in the long term.
“Although we saw Sydney luxury residential sales volume 7 per cent higher in the second quarter of 2022 ($3 million), the third quarter 2022 volume has now tapered back by 24 per cent, and this is likely to continue as we head towards the NSW state election.
“This lower sales volume will continue to impact price growth momentum in 2023, but interestingly, active prime residential listings remain low at a time when not much is being built, so we’re expecting Sydney’s prime price growth to pick up again by 2024,” she stated.
The expert added lingering travel restrictions and looming geopolitical tensions are hindering international buyers, particularly from Asian markets, from viewing prime residential properties in Sydney.
But while the currency play for many international buyers is as favourable now as it was leading into the pandemic, Ms Ciesielski said that the recent doubling of Foreign Investment Review Board (FIRB) fees by the federal government is a “significant hurdle” when considering the top-end of the residential market.
On 29 July, FIRB application fees were increased by 100 per cent. While the fees vary, on residential purchases, foreign investors will now pay $13,200 for acquisitions of $1 million or less, rising to a maximum of $1,045,000 for acquisitions of more than $40 million. Formerly these application costs ranged from $6,600 to $522,500.
The doubling of foreign investment fees has been met with criticism by several market groups, with the Property Council of Australia (PCA) likening the move to the government putting an “investors not welcome” sign on the country’s property market.
Weighing on the buying trend, Knight Frank’s head of residential Erin van Tuil said that as high-net-worth Aussie private buyers “are increasingly agile once again, they’re also spending time preparing to shield any potential turbulence from global headwinds and tackling the impact of increased living costs and rising mortgage rates for their business activities”.
She cited that many of the firm’s local clients have already factored in part of this risk by spending the best part of the last two years creating and rebalancing their domestic property portfolios.
Looking forward, Ms van Tuil expects that the harbour city’s trophy housing market will continue to be an attractive and safe-haven venture for buyers.
“We still see strong underlying opportunities for the Sydney prime residential market over the coming year, such as the volatility in alternative assets including the stock market and cryptocurrency; the significant government investment in transport infrastructure starting to take shape; and the opportunity to create better smart technology homes,” she said.
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