Luxury property boom outpaces housing growth

Land prices, a greater concentration of wealth and sheer demand for luxury homes is causing huge price gains at the top end of the market.

The generational home at 34 The Esplanade, Peppermint Grove is on the market.

The luxury property boom over the past decade outpaced gains in the broader market, with the price of houses at the top end almost doubling in 10 years.

While the price of dwellings nationally rose 72.5 per cent from 2013 to 2023, PropTrack analysis for The Weekend Australian found the luxury market soared 89.5 per cent.

The strong performance was led by houses, with the value of those in the top tenth of the market up 99.1 per cent over the decade, 15 percentage points higher than the market as a whole. Meanwhile, luxury units increased by a smaller 61.32 per cent, but still outpaced broader gains of 55.4 per cent.

PropTrack senior economist Paul Ryan said the pandemic created huge demand for luxury homes, including secondary holiday homes, through the early 2020s, particularly in areas close to water such as Queensland’s Sunshine Coast and Victoria’s Mornington Peninsula.

“Throughout the pandemic, people had money in their pockets and couldn’t travel, which was pushing ­people toward this form of luxury,” Mr Ryan said.

“Strong economic performance has benefited high-income earners and that has, in turn, benefited luxury property.”

Ray White chief economist Nerida Conisbee.

Ray White chief economist Nerida Conisbee said a big driver of price growth was simply land value and a greater concentration of wealth being invested in housing.

“There are only so many properties you can build in our most expensive suburbs, which tend to be located close to beaches, bays and rivers,” she said.

“Anything with even more unique characteristics that is hard to replicate, such as a view or proximity to the water, are likely to have increased in price even further.

“Another driver has been renovation activity. Luxury homes have become even more expensive over time as more investment has taken place. While it is not possible to measure, it is likely a higher proportion of well-located luxury homes have been renovated than the rest of the market and is almost certainly true that more has been spent on them.”

The Perth market, for example, has moved from strength to strength. Analysis by Ms Conisbee showed the city’s median price rose by just over $93,000 last year.

However, inner Perth, which contains prestigious suburbs such as Cottesloe and Claremont, saw an increase of almost double that.

Ray White Mosman Park principal Jody Fewster said strong commodities markets had buoyed housing activity and had left homes in short supply.

“Perth has done incredibly well,” Ms Fewster said. “We’ve got net positive migration, we’ve got a resource sector that’s booming and no (housing) supply.

“Also, given Sydney and Melbourne’s huge run in their eastern suburbs, I think people are starting to realise that the western suburbs of Perth have a lot to offer.”

The generational home at 34 The Esplanade, Peppermint Grove in Perth is on the market.

A generational home overlooking Perth’s Freshwater Bay along prized Peppermint Grove stretch The Esplanade has come to the market for the first time in almost three decades as the owners look to downsize.

The mansion, positioned on a 1559sq m block, boasts extensive mature gardens and multiple living areas.

Ms Fewster said there was “no reason” why prices would continue to rise in the short to medium term, with many luxury homeowners willing to wait for the market to peak before listing.

The Peppermint Grove home is on the market with a price guide of $15m-$20m, with offers to close on March 21.

Meanwhile, PropTrack’s Mr Ryan said he expected the luxury market to rise in line with broader property expectations this year, with growth of 1-4 per cent anticipated. “We’re not expecting the outperformance of the luxury market that we have seen over the past 10 years,” he said.