_Rental growth in most East Coast prestige residential markets strengthening

Knight Frank’s Prime Residential Review Q3 2020 found the average time for a prime property listed on the Brisbane market fell to 112 days in the June quarter from 116 days the previous quarter.

Price growth for prime property in Queensland’s capital followed suit, rising 2.5% over the year to June 2020 and 0.3% over the past quarter, while rents also grew by 6.9% over the past year.

Sydney’s prime property recorded capital growth of 3% over the past year and 0.3% over the past quarter, while average days on market for a prime property fell to 82 days in the June 2020 quarter, up from 72 days the previous quarter. Rents for prime property in Sydney increased by 2.2% over the year.

In Melbourne, where the lockdown has been significantly longer and stricter, average days on market for a prime property was 90, up from 86 days the previous quarter. Capital growth for prime property rose by 1.2% over the year to June 2020, but fell by 1% over the past quarter, while rental growth fell by 0.1% over the past year.

Knight Frank’s Head of Residential Research Australia Michelle Ciesielski said Brisbane’s performance in the prime residential market could partly be attributed to the fact that it came out of the COVID-19 lockdown faster than its southern counterparts.

She said Sydney’s prime property market was more resilient than expected in the second quarter of 2020, and while the volume of prime sales was down, buyer enquiries were strong, with robust demand leading to price growth.

“Across Sydney’s prime regions, the volume of sales in the second quarter of 2020 tallied to 359 prime properties, which was eight per cent below the first quarter, but up 42 per cent over the past year.

“While it is taking slightly longer to sell a prime property in Sydney, this can largely be attributed to increasing difficulties getting finance, rather than a lack of demand.

“In both Sydney and Brisbane’s prime property market a trend has emerged towards people renting until they find their next ideal home, which has led to significant rental growth.

“This trend has been exacerbated by a tightly held sales market, while in Brisbane it is also due to greater demand in the city, with Queensland’s capital now on the radar of returning expats attracted not only to the balmy lifestyle but the relative value.”

Ms Ciesielski said Sydney’s prime market would see an ongoing undersupply of new stock, with 61% fewer apartments to be built in prime regions over the next five years, while in Brisbane there would be 62 per cent less new stock, which would assist in ridding the city of its oversupply stigma.

Knight Frank National Head of Residential Shayne Harris said moving forward, the average days on market for Sydney prime property listings was likely to grow due to ongoing finance delays, despite entering the ideal spring selling season.

“We are seeing strong demand from buyers, with quality prime properties receiving offers very quickly, but it is taking some time for deals to be completed,” he said.

“As the new supply pipeline continues to diminish in prime regions, Sydney’s prime property is well positioned to face a challenging economic year ahead.

“In Brisbane, the maturing prestige market has significant appeal to both upsizers and rightsizers – those downsizing to luxury apartment living.

“Despite this, the Brisbane prime market will not be immune to the economic challenges ahead. There is, however, some comfort in the significant reduction of new product being built across the Brisbane prime region in the coming years.”

Mr Harris said in Melbourne, heading into 2020 confidence had started to return to the city’s prime property, spurred on by lower interest rates, rising wealth and prominent prime projects being built.

“With an extended COVID lockdown, the volume of sales for prime property fell in Melbourne to be down by 25 per cent over the June quarter, but they are still up by 21 per cent annually.

“Being stuck at home has redirected buyers’ minds to their priorities and lifestyle, and we expect demand in this city to return when inspections can be done in person, although with the lockdown extended it’s likely Melbourne’s prime property market will lag other cities in recovery in late 2021.

“Although lowered over the next five years, the market may be further hindered by a solid pipeline of new supply across the prime regions and heavy reliance on a weakened population growth.”