_Luxury residential market in Perth leading Australia
The luxury residential market in Perth has trumped other Australian cities across the board in price, prime rental growth and largest decrease in the number of days prestige properties are listed on the market for.
The extraordinary sales results in Perth’s prime market look to continue to increase, with the volume of sales up 89% in the year ending March 2021. The first quarter of 2021 saw the highest number of prime properties sold in a quarter on record, with 185 prestige sales over this period between $2 million and $7 million. This result was 10% higher than Q4 2020, evidencing the growing trend. Similarly, the price of new prime apartments increased by 5.6% in 2020 to an indicative $15,000 per sqm.
Despite the immense surge in prime sales overall in Perth over the last year, the number of super-prime sales, defined as residential sales over the value of $7 million, were down 18%, though six sales were recorded in Q1 2021, which may indicate momentum is building back up in this sector.
The demand for prime properties was further evident in the decreasing number of days a prime property was on the market, with this number compressing by an incredible 27 days, compared to the national average compression of one week. In Q1 2021, the average days on market for a prime property in Perth was 128 days, compared to 155 days one quarter ago. Sydney and Melbourne lead Australian cities for average days on market with 86 and 97 days respectively, though the surge in demand for prime properties in Perth has seen its prime properties marketed for 27 days less on average, the most compression across Australia.
Knight Frank’s Head of Residential Research, Michelle Ciesielski said: “Perth’s prime market is performing exceptionally well for both owners and investors, with almost every driver indicating further growth Developers have the confidence to kick-off projects which have been earmarked for some time, although they must be aware buyer preferences have shifted.
“The pandemic has highlighted that rightsizing buyers, those downsizing to luxury accommodation, are seeking more living space and ideally an additional bedroom than traditionally demanded. Perth’s prime new apartment pipeline is heavily skewed towards two-bedroom apartments over the next 3-years, representing 44% of the total prime apartments, compared to a 28% share of 3-bedrooms to be built.
“Although encouragingly buyers have become more astute, they need to be prepared there is currently less new product being built across the prime regions and with recent market performance, they may be in competition with buyers from interstate,” Ms Ciesielski said.
Prime (luxury) residential property is defined as the most desirable and expensive property in a given location, generally defined as the top 5% of each market by value. Generally, ultra-high-net-worth individuals are responsible for the purchase of this category of real estate, being an individual with a net worth of over US$30 million. The increased level of demand, and capacity for, prime residential real estate in Australia looks to continue to grow with the ultra-high-net-worth population of Australia, which grew by 10.9% in 2020, to 3,124 Australians, and is forecast to continue to grow annually by 3.8% over the next five years. Perth had the third highest share at 11%, with 354 ultra-high-net-worth individuals.
The immense momentum in Perth’s prime property market highlights the lacklustre new prime development pipeline over the coming years. The number of new apartments and townhouses completed in prime regions of Perth in 2020 was 850, which is 50% below the number build in 2019 and below the 3-year average of 1,425 new apartments and townhouses. This looks to further decrease in 2021, with 38% fewer apartments and townhouses forecast to be completed this year, which shows a concerning trend given high levels of demand for this real estate.
As a result of this momentum, Knight Frank Australia has recently entered into a partnership with Mack Hall Real Estate, Perth’s premium agency for prestige residential property. Knight Frank’s The Wealth Report 2021 found that Perth was the top-ranked city in Australia for luxury residential price growth, and with this growth set to continue, the two businesses will work together in the luxury residential market in Perth to secure listings and service clients.
Mack Hall said: “Perth’s prestige market is performing exceptionally well, with continual growth on the horizon. In the last two quarters alone, we’ve seen up to 20% price growth for some properties in the Western Suburbs, with continued, strong demand at auctions. Zero vacancy is being recorded by many property managers across the city, with a significant number of hopeful tenants attending rental inspections, and this is also being extended to the prestige residential space.”
Capital growth for prime property in Perth was healthy, with 4.1% growth in the year ending March 2021, well above the national average of 2.9% annual growth. Australia’s prime annual growth was led by Perth at 4.1%, Brisbane at 3.8% and the Gold Coast at 3.5%, with Sydney (1.9%) and Melbourne (0.4%) trailing well behind.
Perth has led rental growth for prime properties in cities across Australia, with a 5.3% annual growth to March 2021. Over the past year, prime rental growth increased by 1.1% on average across Australia, though gross rental yields trended down slightly year-on-year to 2.64% in Q1 2021 compared to 2.69% a year ago. In Q1 2021, the gross rental yields for Perth prime property trended up 5 bps to 1.82% and rental growth was up by 2.9%.
Mr Hall continued, “Though we have seen exceptional growth in this market over the last six months especially, we do expect a natural plateau over the next quarter through the winter months as this rate of immense growth won’t be continually sustainable.”
Aside from the growth in the ultra-high-net-worth population, conditions in the Perth market contributing to the growth in demand for prime residential property include a strong stock market, solid business conditions off-the-back of surging mining activity and forecast growth in private investment.
Read the Perth Prime Residential Review Q2 2021.
The Australian and reports for each city can be viewed below: