Building costs drive demand for prestige homes in ‘red-hot’ Perth market

Demand for houses valued up to $20 million is strong in the Australian prestige residential market, with new research revealing local buyers and upgraders are the most active.

Haiven Property director Sean Hughes said his team was seeing surging demand and racking up record prices for luxury properties listed along Perth’s northern coastal strip.

Perth property is proving resilient despite multiple rate rises.Credit: iStock

“Our experience is that the Perth prestige residential sector is red-hot, and it’s set to stay that way for the foreseeable future because this slice of the market remains significantly undervalued at present,” he said.

“From Trigg to City Beach, Sorrento, Iluka and beyond, interest is high from all corners of the market, particularly local buyers keen to upgrade or downsize and expats searching for a high-end home in Perth’s most prestigious coastal locations.

“In these premium suburbs, finding land is rare and, even if you can secure it, the cost and time to build new homes is a deterrent, meaning demand is sky-high for existing homes.”

CBRE’s Prestige Residential Valuer Insights Q3 2024 surveyed valuers from across Australia who specialised in high-end residential properties.

A total of 40 per cent valuers reported demand for prestige property as strong to very strong in their local markets, with South Australia and WA clocking the strongest demand.

Valuers reported demand was strongest for multimillion-dollar homes valued up $20 million, with more price growth expected in WA over the next 12 months.

Strategic Property Group managing director Trent Fleskens said Perth’s property market was moving into third gear.

He said prestige home buyers sought value under replacement cost in the luxury space, where rebuilding the same mansion would be 50 per cent more expensive than it cost in the last decade.

“The smart money moves first,” he said.

“When Perth’s property market was trying to get out of first gear in 2017-2018, it was the high-end of the market making the decisive moves.

“Again, in late 2024, with the anticipation of further competition through expected lower interest rates next year, it is the top end of the market that is leading in its investment decisions.”

Underscoring the demand in Perth’s luxury residential market was the off-market sale of a home in Seaward Loop, Sorrento for $6.1 million, the highest sale price north of Scarborough in nearly a decade.

Down the coast, former Liverpool goalkeeper Brad Jones and his wife Dani have listed their multimillion-dollar home in Applecross.

Located at 47 Duncraig Road, the luxury five-bedroom, five-bathroom property is set on a large block and boasts a guest suite and full second kitchen.

It last sold for $3.9 million in 2020. The couple are now seeking offers over $7 million.

Ray White Group chief economist Nerida Conisbee said sharp increases in construction costs had been a feature of the economy post pandemic, morphing from what started as supply chain blockages to the largest number of construction companies going into receivership ever recorded.

“Although it is now starting to be resolved, it remains a lot more expensive to build a new home now compared to pre-pandemic,” she said.

“This gap between the cost of building a new home and buying an existing one has been a driver of price growth over the past two years.”

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