A study by Knight Frank has revealed that Sydney is the strongest prime property market in 2021, with luxury prices in the city set to increase by 10 percent by the end of the year, with markets across the world projected to rise faster than predicted just six months ago.
Knight Frank’s Head of International Residential Research, Kate Everett-Allen, says there are a few major factors that are contributing to the worldwide increase.
“Government fiscal stimulus measures have been revised upwards, protecting jobs and incomes via furlough schemes meaning there have been few forced property sales,” she says.
“Banks in key developed markets offered mortgage holidays to customers reducing repossessions and foreclosures. Households accrued a total of over US$5 trillion globally in savings during lockdown, enabling some homeowners to undertake home improvements but others have opted to relocate, upsize, downsize or buy a second home/investment property.”
2022 will see Sydney share the title of the strongest prime market with London, with both cities forecast to see prime prices accelerate 7% year-on-year. This rise would represent prime central London’s strongest annual price performance in almost seven years.
Tax and lending incentives have also motivated buyers into making a move. Many householders took advantage of lower purchase costs and/or accessed mortgage finance with smaller deposits. Construction rates slowed due to lockdowns and social distancing exacerbated the lack of new supply in several key cities putting upward pressure on prices. Changes to working patterns also prompted homeowners to rethink their lifestyles rendering the five-day commute obsolete for some industries and enabling a move to the suburbs or countryside.
The Sydney market rose from 7 percent between December 2020 and July 2021, with closed borders seeing many wealthy Australians purchase at home as opposed to abroad. The first quarter of 2021 saw 1,429 prime sales recorded, the highest quarterly figure on record for Sydney and despite recent lockdowns momentum is being maintained. Hong Kong and New York aren’t far behind Sydney with their 2021 forecasts shifting up by 5 and 4 percent respectively between December 2020 and June of this year.
Prime markets have arguably operated against a more challenging backdrop during the pandemic than mainstream housing markets due to their strong international bias and the stringent travel bans put in place. For some cities this means it’s likely to be 2022 before the effects of looser travel arrangements starts to be felt and prime sales gain traction, but for other cities such as Miami, Auckland, Hong Kong and Geneva their domestic prime buyers are compensating for the absence of non-residents.
The outlook for prime residential markets will be closely tied to the ease with which cross-border transactions can start to normalise, and whilst virtual viewings and improved technology have assisted in this area, the reality is the resumption of commercial air travel will be key.
The path of the Delta variant, travel restrictions, vaccine rollouts, as well as a range of other factors, will play a part on the elite property market in the coming months.
For more information, visit knightfrank.com.au.