Luxury home prices to lag in 2011

With the Australian property market officially in a state of hiatus due to rising interest rates and less than confident consumer sentiment, it’s no surprise that the luxury housing sector is predicted to suffer this year.

A recent report from Bloomberg, citing data from the Real Estate Institute of Australia, revealed that the amount of property listings worth more than $1 million increased by 40% more than average for the December 2010 period.   

This has led many industry analysts to suggest that prices in the blue chip property sector could decline throughout 2011; a trend that began during the six months to September last year. According to RP Data, prices of the most expensive 10% of properties in Sydney fell by 7.5% during the period, while Melbourne’s top end house prices dropped by 10.8%.

Such declines were in stark contrast to the balance of the market in both Sydney and Melbourne, where average prices rose by 1.1% and 2.5% respectively for the six months to September 2010.

These downward movements are expected to continue throughout 2011, as nervous vendors are more willing to sell prior to auction, reducing their price expectations by as much as 15% in some instances.

The luxury home market is notoriously volatile and generally one of the first sectors of real estate to take a hit during cyclic downturns.

According to RP Data economist Tim Lawless, Australia’s blue chip properties, “were once considered to be safe havens during a downturn. More recently, however, the premium housing sector has displayed a higher level of volatility.”

REIA president David Airey said of the property market in general, “There’s about a 5 percent gap in what sellers expect and what buyers are willing to pay. In the first and second quarters of 2011, there will be a rise in activity as sellers adjust prices down.”

The lag between vendor expectation and buyer sentiment, along with flagging demand for homes between $2 million and $5 million, are just a couple of reasons for the recent glut of top end properties on the market.

Additionally, there are anecdotal reports from various agents that professionals such as investment bankers, lawyers and accountants – who generally make up the buyer demographic or this sector – are waiting to see what happens with the US and European economies.


Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.


Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.

Michael Yardney


Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

'Luxury home prices to lag in 2011' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.


Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...