Luxury homes were the asset class of choice for Australia’s ultra-rich, with 1-in-3 spending nearly a third of their wealth on their main or second property last year, according to Knight Frank’s latest Wealth Report.
The high demand for luxury homes has seen a literal race for space, with ultra-wealthy Australian buyers competing for large waterfront plots in Sydney, and large apartments with roof terraces, balconies or outdoor spaces, Michelle Ciesielski, head of residential research at Knight Frank explained.
“There is widespread concern, as new homes have generally been shrinking in size over recent years, and with significant lags in construction coupled with supply chain issues it’s going to take some time to deliver,” she said.
“This will only generate a premium on large luxury homes for some time to come.”
She added that in 2022, we will see the luxury housing boom continue as conditions return closer to pre-pandemic levels and demand for property in cities grows.
In Australia, 28% of Australian ultra-high net worth individuals (UHNWI’s) plan to buy a home in 2022 and we know 36% of Australian UHNWIs are considering refinancing options in the next 12 months to capitalise on the current low-interest rate environment, according to the report’s data.
The top trends for the luxury property market in 2022 will be:
- persistent stock shortages in prime markets;
- ramped up taxes and cooling measures;
- and the further detachment of the super-prime market of properties US$10 million-plus, Ciesielski explained.
Wealthy Aussies boomerang back to the city
Not only does the report show that the demand for luxury property has surged in the wake of the pandemic, but it also shows that the mass exodus from Australian cities has undergone a boomerang effect in the last year.
While we previously saw a trend of Australians leaving the city and moving to regional areas in search of more space amid flexible working and prolonged lockdowns, the report shows that ultra-wealthy Australians are now moving their wealth back to the cities and are also investing in a second home.
And the move has fuelled a sharp rise in prime residential prices in the capitals over the past 12 months, of 12.3%.
In fact, all Australian cities in the Prime International Residential Index 1001 exceeded the prime global price growth in 2021.
But unsurprisingly, the Gold Coast came out on top as the best performing Australian city, ranking at number 12 globally with 17.1% growth, followed by Sydney at number 17 (16.2% growth).
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Brisbane placed at number 29 (11.2%), Perth in 31 (10.5%) and Melbourne in 39 (9.4%).
Globally, overall, The PIRI 100 grew 8.4% in 2021, up from just under 2% in 2020 – the highest annual increase since launching in 2008, with only 7 of 100 cities seeing a decline in prices and 35% of locations seeing double-digit growth.
Hotspots for 2022
Around the world, the report has identified 12 ‘hotspot’ suburbs that are set to experience surging growth in demand and pricing for residential property.
This is based on income growth potential, health, and wellbeing, education, tax, relative value, and infrastructure.
And it's our very own Byron Bay which is tipped for the strongest growth forecast around the world.
The area is expected to have a price growth forecast of 30-35% over the next 5 years.
Competition for residential property will only continue to intensify as Byron Bay’s environmentally-minded council has limited the number of new homes built over the past decade.
“In the past two years, we have seen substantial emphasis from ultra-wealthy buyers seeking homes with a significantly reduced impact on the environment,” Ciesielski said.
“There is a growing, committed pool of buyers asking questions spanning energy efficiency, embodied carbon, and the sustainability of materials.”