_Sydney placed second globally in 2022 for prime price growth

Knight Frank defines the prime residential market as being the most desirable and expensive property in a given location, generally defined as the top 5% of each market by value.

Sydney is estimated to reach prime residential growth of 12% by the end of 2021, after recording 10.7% growth in the year to Q3 2021.

The reopening of borders, the return of investors and the growing appetite amongst domestic buyers for second homes on Australian soil, heightened by recent lockdowns and travel bans, will see prime prices accelerate further across Australia.

According to Michelle Ciesielski, Knight Frank’s Head of Residential Research, “Although Sydney’s mainstream market has rebounded to record 24% annual growth in the year to Q3 2021, the prestige market has experienced a lengthier run of upward trajectory in prices as this market advances in line with other developed global cities.

“There have now been 35 consecutive quarters of uninterrupted positive annual growth in Sydney’s prime market, averaging 7.3% growth since 2013. Although we’re hearing of record prices being achieved at the very top end, the growth in the prestige market is steadily coming off a much higher footing.

“If we were to compare this prime property performance to the mainstream market, there have been only 8 quarters of positive annual growth to date, following 7 quarters of decline when impacted by the tightening of lending restrictions.

“Contributing to Sydney’s prime values, the super-prime market is performing exceptionally well with many suburban records being achieved in excess of $10 million, especially for those homes located close to the water.”

Sydney wasn’t the only Australian city to perform well in the prestige market in the year to Q3 2021. All five major cities ranked in the top 23, from 45 global cities in the Prime Global Cities Index Q3 2021, averaging 9.3% annual growth – although this is still shy of the overall rate of growth for the global index at 9.5%.

While Sydney saw 10.7% annual growth in this time, Gold Coast and Perth were close behind with double-digit growth of 10.5% and 10.4%, respectively. Brisbane registered 8.4% growth, whilst Melbourne continued to pick up pace with 6.5%.

Following Sydney’s prime forecast of 9% in 2022, Gold Coast is earmarked to see the prime residential market grow by a further 8%, whilst Melbourne closer to 7%, followed by Perth and Brisbane at 6%.

Kate Everett-Allen, Head of International Residential Research at Knight Frank said: “Since the start of the pandemic we’ve monitored the performance of global cities closely and the story is an evolving one. The narrative has pivoted from “cities are dead” to “smaller, secondary cities are king” and now “metropolises are back”.

“Behemoths like New York and London look to be awakening from their slumber with the pace of prime sales quickening and annual prime price growth moving into positive territory for the first time in three and six years respectively,” she concluded.

Global trends to watch in 2022:

• The Chinese mainland's slowdown: The Chinese leadership look steadfast in their goal to control developer financing and restrict credit growth in its push towards 'common prosperity'. Evergrande's collapse is unlikely to kick-start widespread contagion, but the direction of policy suggests more muted price growth in the medium term
  
  
• Stepping away from stimulus: With some central banks taking cautionary steps away from ultra-accommodative monetary policy, asset prices will no longer be artificially inflated
  
  
• Higher taxes: Singapore is considering a wealth tax, President Biden has proposed increasing the top rate of tax for highest earners, the UK is reviewing its capital gains taxes and Spain plans to introduce a rent cap for landlords with multiple properties
  
  
• Red tape: Property cooling measures, non-resident restrictions and tighter regulation of holiday rental platforms such as Airbnb are high on the agendas of city authorities
  
  
• Rental recovery: Top tier cities are seeing rents and demand accelerate as CBDs reopen. Buy-to-let and institutional investment will increase where the numbers stack up
  
  
• Greenback to strengthen: The US dollar is forecast to maintain its current strength in 2022 as global economic uncertainty rises and the Federal Reserve looks to tighten monetary policy

Read the Prime Global Forecast and the Prime Global Cities Index Q3 2021.

For more information, contact:

Michelle Ciesielski
Michelle.Ciesielski@au.knightfrank.com
+61 414 694 220