Australian Prime Property Market Continues To Surge
After a steady year, even greater growth is predicted across cities in 2021.
2 min
Luxury residential price growth was consistent across Australia in 2020, but strongest in smaller cities, with greater growth forecast for 2021, according to the results of the Prime International Residential Index (PIRI 100) in the forthcoming edition of Knight Frank’s The Wealth Report 2021.
The PIRI 100, which tracks luxury residential prices across the world’s top 100 residential markets found five Australian cities – Perth, Gold Coast, Brisbane, Sydney and Melbourne – were ranked in the top 65 for luxury residential market performance over the past year.
It’s smaller cities that shone in 2020, with Perth coming in as the top performer at number 24 with 3.6% annual growth, the Gold Coast following at 36 with 3.2% annual growth and Brisbane at 44 with 2.5% growth. Sydney and Melbourne both held up well in what was a tumultuous year for the global market, with the Harbour city coming in 56 (1.1%) and Melbourne 63 at (0.9%).
“In 2020, 29 per cent of locations saw prices decline year-on-year, up from 21 per cent in 2019, however, five markets also registered double-digit price growth in 2020, compared with just two the previous year,” said Knight Frank’s head of residential research Australia, Michelle Ciesielski.
“Australia’s luxury residential property market fared well, with three of the five cities included in the PIRI 100 recording growth greater than the global average, and in the case of Perth, nearly doubling it,” Ciesielski added.
The future of the prime market looks bright with the Knight Frank report forecasting luxury residential property prices in Perth, the Gold Coast and Sydney to rise by three per cent over 2021, while Brisbane is predicted for a two per cent rise and Melbourne to grow at a slower one per cent.
The forecast comes off the back of demand for luxury property in Australia continuing to be strong, boosted by the ongoing pandemic and the continuing return of expats.
“Property prices in Perth are coming off the back of several years of price decline, but recently population growth has improved with prospering mining activity and resilient commodity prices, and this has led to a strong rebound in the residential market,” said Shayne Harris, national head of residential, Knight Frank.
“In Sydney, it’s the super-prime property market – those sales exceeding $10 million – which is driving up the overall prime performance as we see our ultra-wealthy clients upgrading the family’s main residence and buying new holiday homes as international travel is likely to remain subdued in the coming years.”
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New research suggests spending 40 percent of household income on loan repayments is the new normal
3 min
Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.
Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.
“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.
CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.
Sydney
Sydney’s median house price is $1,414,229 and the median unit price is $839,344.
Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.
Melbourne
Melbourne’s median house price is $935,049 and the median apartment price is $612,906.
Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.
Brisbane
Brisbane’s median house price is $909,988 and the median unit price is $587,793.
Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.
Adelaide
Adelaide’s median house price is $785,971 and the median apartment price is $504,799.
Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.
Perth
Perth’s median house price is $735,276 and the median unit price is $495,360.
Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.
Hobart
Hobart’s median house price is $692,951 and the median apartment price is $522,258.
Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.
Darwin
Darwin’s median house price is $573,498 and the median unit price is $367,716.
Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.
Canberra
Canberra’s median house price is $964,136 and the median apartment price is $585,057.
Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.
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