The prestige property market on Sydney’s Upper North Shore had an exceptional 2021 but so far this year, activity has been calmer.
We explore why the market for premium properties operates differently from other segments of the residential real estate market and analyse what’s driving it right now.
What constitutes a prestige property?
It’s difficult to provide an effective analysis of the prestige property market without first understanding what it is. Knight Frank, which provides a quarterly report on Australia’s prime residential market, defines it as the market in properties over $3 million in Sydney or Melbourne, or $2 million in other parts of Australia.
Of course, the problem with that definition is that here on Sydney’s Upper North Shore, $3 million doesn’t even meet the median value of a house in suburbs such as Killara ($4.2 million), Lindfield ($3,785,000), Warrawee ($3,267,500), Pymble ($3.28 million), Gordon ($3,273,750) or Roseville ($3,805,000). Under this definition, entire suburbs would be classed as prestige.
For that reason, we generally don’t put an exact figure on what constitutes a prestige sale but more focus on property characteristics. That is, the property should be unique or best-of-class in what it offers. It could be that it has been designed by an award-winning or well-known architect, occupies an exceptional block of land or has a one-of-kind view. It also usually means having start-of-the art finishes.
A genuinely prestige property should also attract buyers who tend to be ‘location neutral’ – that is, they’re looking for something that fulfils certain criteria rather than being on a particular street or even a particular suburb.
Of course, once a property fulfils these criteria, it will naturally sell for more than other properties. How much more depends on a range of factors.
Why prestige property moves differently from the rest of the market
Once you get into the prestige market, people aren’t generally buying with a 20% home loan and 80% mortgage as they do in the first home buyers’ market (although some do). That means the prestige sector is generally less sensitive to movements in interest rates.
Prestige real estate also tends to attract greater interest from ex pats and overseas buyers than other market segments.
For these reasons, prices in the prestige sector tend to be more affected by factors such as exchange rates, merger and acquisition activity, the share market, and general economic conditions at home and overseas.
The main factor impacting the prestige market over the past 18 months
Perhaps the main factor impacting our local prestige property market over the past 18 months has been lifestyle. A lot of people have decided they want more room to move and are prepared to invest significant money to achieve it. On top of this, Sydney’s appeal as a lifestyle destination has grown markedly, particularly in light of COVID-19. And few places offer a better lifestyle even in Sydney than here in Ku-Ring-Gai and the Upper North Shore.
At the same time, there has been an acute lack of stock across the property market but especially at the prestige end. This increased competition for quality property.
As a result, prices have risen to record highs at the top end of the market. For instance, Killara’s median price has risen almost 70% since 2019, according to realestate.com.au.
Prestige property in early 2022…
Since the start of the year, things have been somewhat quieter in the prestige market. We’ve seen more premium properties available for sale, meaning buyers have more choice. We’ve also seen some buyers take a ‘wait and see’ approach, largely as the result of greater economic uncertainty based on events such as the federal election, the ongoing impact of Omicron on the global economy, and Russia’s invasion of Ukraine.
Despite this, prestige property is still attracting interest – and we expect prices to rise, albeit at a slower pace than last year.
If you’re interested in buying or selling prestige property on Sydney’s Upper North Shore, get in touch.