_High-net-worth individuals strategically consider their next move

Australia’s rapid response to closing its borders, social distancing measures and the high portion of COVID-19 testing has been admired around the world—in addition to the country’s unrivalled lifestyle, extensive waterfront and parklands dotted throughout the major cities.

As the world comes out of lockdown in these unprecedented times, many high-net-worth individuals are strategically considering these attributes for their next move.

The momentary withdrawal of prime property listings throughout the COVID-19 pandemic has minimised what was already a shallow pool to choose from across Australia, with increased sales transactions being made off-market, and so far, with little discount. 

At Knight Frank we consider prime property to be the most desirable and most expensive property in a given location, generally defined as the top 5% of each market by value.

Although prime property prices have moderated to more sustainable growth rates over the past year, Australia’s five major cities continued to record positive annual capital growth in the first quarter of 2020.

Sydney prime property recorded the highest annual growth in Australia, with 4.7%, ranking 8th from 46 global cities in the Prime Global Cities Index.

Melbourne ranked 17th (with 3.0%), Gold Coast 26th (1.7%), Brisbane 27th (1.4%) and Perth 29th (1.0%).

Speaking with my colleague Mark Manners, Head of Prestige Residential, NSW, he shares “there are many qualified and cashed up buyers in the market”.

For instance, recently two harbourside properties in Mosman have been sold by Knight Frank Prestige as the COVID-19 restrictions started to ease – both initially marketed as auction campaigns but moved to private treaty when restrictions were imposed, and people had retreated from the market.

“Both properties had been on the market for some time and as soon as restrictions lifted we saw an increase in enquiry and inspections by genuine buyers. We ended up selling both within two weeks of restrictions lifting,” Mark said.

Mark continued, “A-Grade properties are still in high demand and are transacting at solid prices. There are many qualified and cashed up buyers in the market but very little stock, which is what is holding up the prices.

“Many vendors are choosing to sell their properties “off market” at the moment due to concern that buyers make low ball offers thinking vendors are in trouble and need to sell. This lack of stock and off market activity has never seen buyers agents busier trying to find source off-market properties their clients would not otherwise be aware of.

“Buyer enquiry from expats and overseas buyers continue to be strong as people are looking at Australia as a safe and stable place to live having handled the coronavirus pandemic better than most countries,” Mark concluded.

Many Australian expats are making plans to return earlier than first envisaged following the COVID-19 pandemic and Brisbane is becoming increasingly attractive on their radar.

Jason March, who heads up our Knight Frank Prestige Residential Sales team in Queensland recently shared with me, “The relative value for Brisbane’s prime property has seen enquiries come through from outside the local market, with Sydney and Melbourne buyers taking advantage of the lower price point.

“This allows a luxury prestige home to be purchased with money left in the budget for upgrading the yacht, buying closer to maritime facilities and enjoying the sunshine for most months of the year. There hasn’t been a more attractive time to be located in Brisbane while international travel is limited.

“Brisbane is the gateway to the sunshine state and when compared on a global platform, is relatively affordable for those seeking a second home for their portfolio,” he concluded.  

Prime property markets often have a significant international bias in terms of buyer profile. The value proposition remains in place for Australian cities when comparing how much US$1 million buys around the world.

In Sydney, US$1 million bought you 57 square metres of luxury internal floor space at the end of the first quarter of 2020.

Close to double this space could be purchased in Melbourne with 109 square metres. Perth follows with 133 square metres, Brisbane 139 square metres and the Gold Coast 152 square metres.

Prior to the COVID-19 impact, the Australian high-net-worth population was projected to grow by 34% and ultra-high-net-worth individuals by 29% over the next five years.

As Australia enters an unavoidable recession for the first time in 29 years as a result of the pandemic, it’s likely wealth creation will overall moderate for the remainder of 2020.

An economic recovery is forecast for Australia in 2021, the speed dependent on the outcome of several significant economic stimuli expected to be eased for the last quarter of 2020.

In saying this, by global standards, Australia is currently successfully containing the spread of COVID-19 and allowing further restrictions to be relaxed on activities in accordance with the Australian Government’s 3-step framework.

Following the economic movement, the prime residential forecast places Sydney, Melbourne, Brisbane, Perth and the Gold Coast to record flat or low price falls (0% to -4.9%) by the end of 2020.

All five prime residential markets are forecast to improve by the end of 2021 with Sydney, Melbourne and the Gold Coast likely to be first to see low price growth (of 0.1% to 4.9%), while Brisbane and Perth remain stable.

For more information, read our latest Australian Prime Residential Review here.