Interest rate differentials between the US and Australia are set to narrow further, creating Foreign Exchange opportunities for investors
The high cost of living from rising interest rates and low wage growth is already impacting residential property prices across Australia, but what about luxury property?
Quality trophy properties have remained generally resilient on the East Coast of the country over the past year, with new record prices being achieved.
The market remains undersupplied, which has supported the prices achieved. The 3% increase in official interest rates in 2022 has also not impacted this smaller group of luxury property owners, unlike the wider premium or broader market which has eased following record growth in 2021.
The broader market is expected to decline, according to NAB Private Client Executives, Josephine Hanna and Darian Kuzma.
“There’s been a lot of talk about a 20% decline in property prices. This is already true in some pockets, and we expect further downside in prices across all markets as $100 billion of fixed rate mortgages are due to reset over the next 12 months, leading to an increase in home owners looking to offload some assets to free up cash flow,” said Hanna.
Kuzma said the impact of an expected protracted period of high interest rates will eventually impact the luxury property market. “Whether you have one property or many, rate rises and pressure from a rising cost of living will have some level of impact on every household, and the greater the level of borrowing an individual has the greater the impact,” he said.
Helping to support luxury property prices are opportunistic buyers, says Hanna: “We are seeing strategic acquisitions as ultra-high net individuals, particularly from first generation Asian communities who traditionally sought homes on or close to Sydney Harbour, seek lifestyle properties in the $30 million-plus range, leading to increased demand for large rural properties, form example.”
Kuzman said offshore buyers, particularly from China, remain active in the $15 million-plus space and were seeking luxury water-front properties. They were also open to major renovations or redevelopment.
This year will certainly be interesting as the interest rate scenario plays out, however, it is now part of history that 2022 was a year where record prices were smashed.
Paying for prestige
New price records were set during the year with the Christmas Eve $130 million purchase of Point Piper Sydney Uig Lodge, a Scottish baronial-style estate on about 3300sqm at the top of Wentworth Place, achieving a new benchmark in the prestigious suburb, smashing the $100 million previously set in 2018 for the Fairwater property, also in Point Piper.
The most expensive property for much of the year was in Melbourne’s Toorak with the sale of abandoned dwelling known as Toorak’s “ghost house” on 7187 sqm for $80 million in August. The purchaser is reported as planning a $70 million new dwelling on the site. This exceeded the previous house price record of $52 million for the mansion known as Stonington, in Malvern set in 2018.
When it comes to Australia’s most expensive properties, Sydney’s eastern suburbs and Victoria’s Toorak ruled the list for another year.
Melbourne runs hot
Toorak remained the key luxury suburb, demonstrated by $80 million “ghost house” sale and closely followed by the August sale of “Blair House” for $74.5 million. The Georgian Revival residence designed in 1936 features 7843 sqm of parkland. Earlier in the year, 802 Orrong Road sold for $38.5 million, while In November 5 Yar Orrong Road went for $32 million (selling off-market in 4 days) and 26 Albany Road sold for $28 million.
Other luxury suburbs such as Armadale, Kew, Hawthorn East and Brighton also recorded strong activity over the year. Kew saw the suburbs record broken, with reports of the circa 1888 ‘La Verna’ estate at 39 Sackville Road being sold for more than $20 million in April. The sale of a six-bedroom 3370sqm estate known as “Namarong” at 52 Hampden Road Armadale for circa $26.5 million also set a record for that suburb.
Other notable sales included 33 Monomeath Avenue Canterbury ($21M), 11 Patterson Street Hawthorn ($19.5M), 22 Shakespeare Grove Hawthorn ($18.25M), 52 Sackville Street Kew ($16M) and 5 Leslie Grove Brighton ($15M).
Further top sales last year were $35 million for a sub penthouse in Southbank and $26 million for a lifestyle property at 29 Callanans Road, Red South Hill.
Sydney flying high
Sydney maintained its title as the strongest performer in the prestige market, with 8 of the top 10 sales nationwide occurring in the state. Following the sale of a home for $68 million, Vaucluse overtook Bellevue Hill as the state’s most expensive suburb, with a median price of $7.9 million. Vaucluse also recorded a $62.75 million sale at 38 Wentworth Road in February, and $60 million for 21 Coolong Road in December.
Other top sales were a waterfront estate at Darling Point for $60 million, a federation mansion in Bellevue Hill for $52.5 million, a four-bedroom home in Mosman for $33 million and a six-bedroom dwelling at Palm Beach for $27.5 million.
In Circular Quay, a sub penthouse in One Circular Quay sold for $70 million with Bellevue Hill, Darling Point, Woollahra, Double Bay, Mosman, Avalon Beach, Centennial Park, Bronte, Drummoyne, and Birchgrove continuing to feature a number of luxury property sales during the year.
Queensland – the coast matters
Queensland’s highest reported sale of the year was a Shaun Lockyer-designed mansion on an oceanfront block at 24 Arakoon Cres, Sunshine Beach. The residence sold in April 2022 for $28.5 million in an off-market transaction.
On the Sunshine Coast at Noosa Heads, 12 Noosa Parade in the Noosa Sounds precinct sold in November $27 million. It was a record breaking sale for the area, noting the property was not even on the market. It previously sold for $5.9 million in 2015 with no improvements to the residence since.
Noosa Sound properties are generally considered one of the premier waterfront addresses on the northern Sunshine Coast, with their water frontage and proximity to Hastings Street tourist precinct and main beach being the main attraction. The market for prestige properties in the wider Noosa Heads region has improved significantly over the past 18 months with new value benchmarks being set.
A final note
Given the level of enquiry, returning expats and open borders, agents and buyers advocates anticipate activity in the luxury property market to remain strong. The luxury segment begins 2023 with momentum in a difficult market, and even if the downturn impacts the prestige slice of the market, it is expected to continue to outperform the broader housing market.
The information contained in this article is gathered from multiple sources believed to be reliable as at January 2023 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. NAB recommends that you seek independent legal, property, financial and taxation advice before acting on any information in this article. ©2023 NAB Private Wealth is a division of National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.