The appreciating dollar and new taxes have not deterred overseas investors buying up luxury homes in Melbourne and Sydney, according to the latest Knight Frank Prime Global Cities Index.
The report, for the second quarter of calendar 2017, tracks prime residential prices across 41 global cities and has placed Sydney as No. 6 and Melbourne tenth. Prime property corresponds to the top 5 per cent of the housing market in each city.
While the housing affordability issue in Australia precludes more than half the population from owning a home, the wealthy are in the market, happy to pay up to snare that prime asset.
According to the report, Chinese cities led our Prime Global Cities Index for three consecutive quarters but their dominance looks to be coming to an end as their rate of growth slows following the latest round of cooling measures.
Overall, Chinese cities led Prime Global Cities Index for three consecutive quarters but their dominance looks to be coming to an end as their rate of growth slows following the latest round of cooling measures.
Guangzhou leads the city rankings with luxury prices up 35.6 per cent in the 12 months to June, while European cities such as Madrid, Berlin and Paris have risen up the rankings in the last year. The report did not include exact home prices.
Michelle Ciesielski, Knight Frank’s Head of residential research, Australia, said despite the recent appreciation of the Australian dollar at the tail end of July, it is still favourable and many expats are securing their ideal home for a future return to Australia.
“Foreign interest in prime Australian residential property has remained relatively strong over the past year, with many currencies holding an ongoing purchasing power against the Australian dollar,” Ms Ciesielski said.
“In saying this, more due diligence is being carried out by purchasers – particularly due to tax surcharges being introduced, stronger penalties being enforced by the Australian government for those who breach the rules, and the processing fee now payable for every application to the Foreign Investment Review Board.”
In the latest CoreLogic Home Value Index of capital city home prices, it rose by 1.5 per cent in July and was up 10.5 per cent over the year. In regional Australia, house prices rose by 0.2 per cent in June (latest available) and were 5.4 per cent higher than a year ago.
Savanth Sebastian, senior economist at CommSec, said the economic data was “certainly upbeat”.
“The rise in home prices will garner the most interest. Especially in light of the solid back-to-back gains in property prices,” he said.
“In fact in the past two months national capital city home prices have lifted by 3.3 per cent. Granted the outsized 3.1 per cent lift in Melbourne home prices in July was a significant driver of the overall result, but the gains were broad-based.
“The strength in property prices comes despite the tighter regulations adopted by the banking sector over the past year and highlights the underlying strength in the sector. In fact five of the eight capital cities recorded healthy gains.”
Deborah Cullen, Knight Frank’s head of prestige residential research Australia, said there has been seeing strong inquiry from the local high net worth market and the international prestige buyer market, in particular from Asia and Europe.
“Signature and iconic homes bring expat Australians out to assess and secure something that is a “one-off” purchase and may not come to market again for a considerable time,” Ms Cullen said.
By Carolyn Cummins Courtesy The Sydney Morning Herald