This time last year, we were heading into a buyers’ market in the prestige sector. The GFC was biting, finance and banking executives were losing not only their bonuses but in many cases their jobs and the share market was declining rapidly.
As a result, the prestige property market became oversupplied as high net worth home owners listed their family residences to achieve a nest egg to get them through the economic crisis. Consequently, prestige property prices weakened and properties began selling for less than they were worth in 2007.
What a difference a year makes. Prestige property began rebounding around May 2009 when the buying opportunities became simply too good to refuse. Suddenly, there was value for money at the top end of town and smart buyers with enough cash jumped in.
Following a buy-up of multi-million dollar homes last year, supply in the prestige market has now tightened to a point where demand is likely to exceed supply this year. As a result, I’m expecting a real price surge in the prestige sector as more buyers compete for fewer homes.
In 2009, prestige property vendors who wanted to sell but didn’t need to, decided to hold off until the market improved. At McGrath, we’ve noticed a recent spike in prestige listings in the Dec/Jan period with 43 properties priced above $3 million listed for sale. This by no means indicates a flood of supply about to hit the market – these 43 properties only represent about five per cent of our new listings. However, this sudden increase in high end offerings tells me vendors are feeling much more confident in 2010.
The health of our economy has a great impact on the prestige property market. Greater job stability in finance and banking and a rebounding share market will really boost prestige property this year. In fact, I wouldn’t be surprised if prestige prices return or even exceed their pre-GFC levels by year’s end.
Australian Property Monitors (APM) estimates gains of 10 per cent or more across the nation’s best suburbs and I agree this is realistic – especially in the suburbs with short supply.
It’s important to also note the increasing demand we’re seeing from overseas. A mild relaxation in FIRB rules is allowing more overseas investors to buy Australian property, and due to our remarkably strong economy, we’re increasingly being seen as a safe haven for investment. Ex-pats living overseas are starting to see their work colleagues buying property in Australia. This may heighten ex-pat activity in 2010.
APM recently released a list of the most expensive suburbs in each of our capital cities. These are arguably Australia’s most desirable suburbs among prestige property owners.
If you’re looking to buy prestige property in 2010, consider the supply and demand factor in your suburbs of choice. If there are lots of homes for sale in your price bracket, you may be able to negotiate harder because the market is oversupplied.
In suburbs with short supply, you’d be smart to try buying before auction if you find a house that meets all your needs. Remember, by Christmas 2010 it is likely that prestige property prices will have fully recovered – so I believe you can buy with confidence today!
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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