Luxury Property Is Booming: What It Means for the Broader Market

While parts of Australia’s property market have faced affordability pressures and fluctuating demand, the luxury segment is defying gravity.

According to NAB’s recent report (Luxury Property Continuing to Outperform the Wider Market), high-end real estate has been one of the strongest-performing segments, showing resilience even as higher interest rates have cooled the broader market.

Why is the top end of the market so strong?

And more importantly, what does this mean for the future of Australian real estate?

Why luxury property continues to outperform

The prestige market isn’t driven by the same fundamentals as the broader housing sector.

While everyday buyers are often constrained by mortgage serviceability and borrowing power, ultra-high-net-worth individuals (UHNWIs) and affluent buyers play by different rules.

Here’s what’s driving the surge in luxury property prices:

1. Interest rates don’t matter as much

Most buyers in the prestige market are not as reliant on mortgages as the average property buyer.

Many purchase with cash or use complex financial structures like trusts, offshore funding, or leveraging equity in existing assets.

While interest rate increases have slowed demand in the mid-tier property market, they’ve had little impact at the top end.

In fact, rising interest rates have even reinforced the appeal of property as a store of wealth—especially for those seeking stability in uncertain economic conditions.

2. Scarcity of high-end properties

Unlike new housing developments where supply can be increased, luxury homes in blue-chip suburbs are in extremely limited supply. Prestige areas such as:

• Sydney’s Eastern Suburbs (Vaucluse, Bellevue Hill, Point Piper)
• Melbourne’s Inner South-East (Toorak, Brighton, South Yarra)
• Gold Coast’s Waterfront Homes (Surfers Paradise, Mermaid Beach, Broadbeach Waters)
• Brisbane’s Exclusive Pockets (Ascot, Hamilton, New Farm)

…have a finite number of premium properties.

When demand rises, prices soar, because there simply aren’t enough top-tier homes to meet demand.

NAB’s report confirms this, stating that “with strong ongoing demand and a constrained supply of premium homes, prices continue to rise.”

3. The rise of global wealth migration

Australia has become a magnet for global wealth, with high-net-worth individuals (HNWIs) increasingly choosing to settle in cities like Sydney and Melbourne.

• In 2023, Australia ranked as the world’s top destination for millionaire migration, according to Henley & Partners’ Private Wealth Migration Report.
• Sydney alone attracted over 3,200 high-net-worth individuals in 2023, the highest of any city globally.

These wealthy individuals aren’t just moving for lifestyle reasons, they’re bringing significant capital, driving up demand for premium property.

4. Changing buyer priorities post-pandemic

The way we think about homes has fundamentally changed since COVID.

More buyers, especially at the high end, are looking for:

• Larger properties with more space (think home offices, wellness retreats, and private cinemas).
• Premium lifestyle locations near beaches, parks, and city hubs.
• High-end finishes and sustainable luxury, such as smart home automation and energy-efficient design.

According to NAB, demand is particularly strong for waterfront homes, penthouses, and prestige properties with ultra-luxury features like rooftop pools, expansive views, and private jetty access.

What this means for the broader market

The continued growth of the prestige market has some major implications for Australia’s overall property market.

1. A two-speed market is emerging

The gap between affordable housing and luxury real estate is widening.

While first-home buyers and upgraders are navigating affordability challenges, the top end of the market continues to thrive.

This reinforces the idea that Australia’s property market is becoming more segmented, where different price brackets experience very different conditions.

2. Luxury demand creates “trickle-down” effects

When the high-end market performs well, it often signals positive sentiment across the property sector. Wealthy buyers investing in real estate can have a ripple effect:

• Luxury sales set benchmark prices, which influence premium properties in adjacent price brackets.
• Prestige renovations and developments stimulate jobs in construction, design, and high-end trades.
• Strong luxury property demand supports broader economic confidence, attracting more investment into property assets.

3. The long-term case for blue-chip locations

For investors, one key takeaway is that scarcity and desirability drive long-term capital growth.

While not everyone can buy a $10 million home in Toorak or Vaucluse, the same principles apply to investment-grade real estate:

• Tightly held, high-demand areas will always attract buyers.
• Proximity to lifestyle amenities, water, and transport remains critical.
• Quality properties in premium locations tend to hold their value better in downturns and appreciate more in booms.

NAB’s report highlights this, noting that “premium property markets tend to be the first to recover and perform well in volatile economic conditions.

Final thoughts

While luxury real estate operates in its own economic cycle, it provides valuable insights for investors.

The fact that prestige property is still performing well suggests that:

• Property remains a preferred asset class for the wealthy, reinforcing its long-term value.
• Scarcity is a key driver of price growth—something investors should consider when selecting locations.
• The market is increasingly divided—premium homes are surging while affordability pressures persist for everyday buyers.

For property investors, this reinforces the importance of owning properties in investment-grade locations.

Whether it’s a luxury home or an investment property, quality assets in high-demand suburbs continue to offer strong long-term growth potential.

At the end of the day, if Australia’s wealthiest individuals are still investing in real estate, that tells us something important: property remains one of the safest and most reliable stores of wealth.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.