The prime residential markets of Sydney and Melbourne have stayed in a global ranking of the top 10 cities for 10 straight quarters in part due to demand from downsizers looking to buy well-located property, Knight Frank says.
The NSW capital took eighth place with an 11 per cent growth rate over the 12 months to September, while Victoria’s biggest city came in ninth with an annual gain of 10.4 per cent, the real estate agency’s latest Prime Global Cities Index shows.
The quarterly index compares the price movement of luxury properties, defined as those in the top 5 per cent of each market, in 41 cities around the world. While a stellar 6.8 per cent quarterly gain kept Guangzhou in top place – prices in the south-eastern Chinese city have soared 36.3 per cent over the past 12 months – weaker price growth in some of the largest Asian cities pulled the growth rate of the region’s luxury property markets into third place, with a collective 5.3 per cent annual gain, after Africa’s 7.2 per cent and Australasia’s leading 10.7 per cent.
Demand for high-quality properties was driven by a range of buyers, including well-heeled downsizers who were selling their family homes and wanting homes in convenient locations, the report said.
“Inquiry for prime residential properties has remained strong with private viewings ranging from young, local entrepreneurs through to those downsizing and looking for a low-maintenance home close to vibrant amenities,” said Sarah Harding, Knight Frank’s Australia head of residential.
“The residential market is travelling at two paces for property growth. While the mainstream market has retreated to a more sustainable level of growth, the prime end of the market has continued to strengthen to record double-digit growth.”
Lending hits high
The strong performance of the two top cities goes some way towards explaining the continued strength of housing credit. Home loans to housing investors rose at their fastest pace in nine months in August, pushing total lending to a new monthly high. Figures for September due out on Thursday are expected to show a 2 per cent month-on-month increase, according to the median forecast of economists surveyed by Bloomberg.
While credit restrictions are hitting investors in Sydney, where the proportion investors is the highest of any city, the areas of the greater Sydney market most hit by tighter rules were those on the periphery, while the established, and more expensive suburbs are seeing less of a turndown in demand.
“The investor share of housing loan approvals in NSW has clearly passed its peak, but is still well above historical levels, suggesting some ongoing momentum from investors,” HSBC chief economist for Australia and NZ Paul Bloxham said last month.