Ultra-luxury property market sets new sales records through pandemic

Australia’s ultra high-end property market powered ahead in the September quarter, setting new records despite lockdowns.

Overlooking the Brisbane skyline at Hamilton, ‘Noir’ was sold for more than $10m in November. Picture: Supplied

Fears about the coronavirus have done little to crimp the top end of the property market with Australia’s “super prime” residential market clocking up the highest number of third quarter sales ever recorded.

The pace of sales demonstrates the strong demand for luxury housing even in the midst of the pandemic and recession, according to the latest Knight Frank research.

In total, 39 transactions of super prime properties with a collective value of $594m were recorded over the three months to the end of September; the highest tally of third quarter transactions on record.

The total number of national super prime sales jumped by 4 per cent year-on-year as at the end of the third quarter this year. The super-prime market covers homes sold for more than $10m in Sydney and Melbourne and $7m elsewhere in the country.

Sydney is the most established super-prime market in Australia and in the pivotal third quarter of 2020, sales of super prime property in the city hit $470m – the second greatest volume recorded for any one quarter, only eclipsed in the fourth quarter of 2018 with $580m.

The number of Sydney’s sales transactions in the third quarter of 2020 were 94% higher than the same quarter a year ago. When combining the number of sales from the second and third quarters, 2020 is the second highest year historically.

Knight Frank’s head of residential research Australia Michelle Ciesielski said transactions at the top end of the prime market in Australia were resilient in 2020 despite the ongoing pandemic.

“The record for third quarter transactions this year was reached when the majority of cities in Australia had eased lockdown restrictions, but it was incredibly impressive given Melbourne was still in a lockdown over this time,” she said.

“After a period of confinement, it’s not surprising buyers are seeking more space, and this will be a priority for some time to come, whether it’s upsizing to a stand-alone home with resort-style living and maritime facilities, or right sizing, the downsizing trend towards luxury apartment living with house-like proportions.

“But buyers in Australia are currently faced with very little choice of established and new super-prime stock, which is driving competition for what is available and leading to record transaction volumes.”

The revival of international travel – which is anticipated to return in mid to late 2021 – is likely to further aid the prices in the luxury property and commercial markets.

Meanwhile, overseas investors are also predicted to drive Australia’s office market in 2021, as they are more accepting of lower returns than their domestic counterparts. The proportion of international players is anticipated to grow from 60 per cent of buyers to 75 per cent next year. Office asset capital values have fallen 1 per cent on average since March, with total returns forecast to be 4.2 per cent this year.

Knight Frank chief economist Ben Burston said Australia’s strong health proposition would prove attractive. “Australia also looks relatively attractive compared to other global markets facing more difficulty managing COVID-19 and has better prospects of a speedy return to growth,” Mr Burston said.

“As such, an uncertain outlook for occupier markets is unlikely to change their view of Australia when the outlook is equally or more challenging elsewhere.”

Investment performance in the Australian market moving forward is still expected to be relatively strong compared to previous downturns despite some sectors facing harsher conditions.

The commercial sector on a whole is set to recover in 2022, with capital growth forecast around 4 per cent net. The same growth is anticipated in the industrial space.