Home prices are sky-high, but so are the returns

by | Jun 26, 2016 | Uncategorized

First Published: THE AUSTRALIAN 


Investors paying New York and Paris prices for jewelbox apartments and mansions in Sydney and Melbourne are doing so with good reason, with research indicating Australian high-end homes rate among the best in the world for investment returns.


Luxury property prices in Sydney and Melbourne have risen at more than twice the rate of prestige homes and apartments in Monaco, Singapore and Beijing in the past year and at more than five times that of homes in London, Rome, Geneva and New York.


Property group Knight Frank recorded gains of more than 12 per cent in Sydney and Melbourne’s prestige market in the past year, putting the two cities as third and fourth behind Vancouver and Shanghai for the fastest appreciating prestige property.


“Australasia proved the world’s hottest world region, with prices rising 12 per cent on average ­despite the introduction of a new fee for foreign buyers,” Knight Frank research head Kate Everett-Allen said.


Tight supply, record low interest rates and cheap finance have helped fuel the gains, even as a clampdown in lending standards and a growing unwillingness to lend to buyers earning foreign ­income threaten to put the brakes on appreciation.


Although plans for new, ultra-prestige homes at Crown Sydney and Goldfields House in Sydney, and One Queensbridge in Melbourne, will add to the supply, analysts are sanguine on the prospect of falling prices.


“There is continued demand from foreign buyers not meeting the investment migrants’ criteria of the significant and premium ­investment visas,” said analyst ­Michelle Ciesielski.


Prestige homes throughout Sydney and Melbourne — particularly penthouses — continue to transact on rates that put them on par with international capitals of Singapore, Paris, Shanghai and Beijing. In Melbourne, residential developer Mirvac is fielding interest for a 500sq m penthouse atop its Eastbourne development on Fitzroy Gardens, pricing the 50m-long residence at more than $30,000 a square metre, equating to a total price of $18m.