Luxury residential markets proved resilient in 2023 despite successive interest rate hikes

When it comes to luxury residential property, buyers are getting slightly less bang for their buck in Sydney and the Gold Coast, with Knight Frank’s flagship research report The Wealth Report 2024 finding US$1 million bought a little less space in 2023 than 2022 due to price growth.

In Sydney, US$1 million bought 43sq m of luxury space in 2023, slightly less than the 44sq m in 2022. Meanwhile, on the Gold Coast you’ll get 112sq m for $US1 million, compared to 117sq m in 2022.

Despite this, these Australian cities are still much more affordable for luxury property than other markets around the world, such as Monaco, where you’ll get only 16sq m for US$1 million and Aspen, where US$1 million will buy you just 20sq m.

The findings come as the Prime International Residential Index (PIRI 100) in Knight Frank’s The Wealth Report demonstrates that luxury residential property prices surprised on the upside in 2023, climbing a solid 3.1% on average across 100 selected locations around the world.

In Australia, both Perth and the Gold Coast recorded growth higher than the global average.

Perth recorded the highest residential price growth out of the Australian cities, with a 5.2% rise over the year, and sitting at number 28 out of 100 city, sun and ski locations globally, according to Knight Frank’s Prime International Residential Index (PIRI 100).

The Gold Coast came in second out of the Australian cities with 4.1% growth and in 38th place globally, equal with Stockholm.

Sydney came in in 49th place, equal with Barcelona, with growth of 2.7%, followed by Brisbane in 58th place, with growth of 2.3% and Melbourne in equal 63rd place, with growth of 1.4%.

In 2024, Sydney is predicted to have the highest prime price growth out of all the Australian cities, rising by 5% and coming in fifth globally, while Melbourne is predicted to have price growth of 3%, coming in in eighth place. Auckland is predicted to have the strongest luxury residential price growth in 2024 of 10%.

Of the 100 markets tracked in Knight Frank’s Prime International Residential Index (PIRI 100), 80 recorded flat or positive annual price growth.

Manila (26%) leads the rankings but Dubai (16%), last year’s frontrunner, only slipped one spot. The Bahamas (15%) comes in third place with Algarve and Cape Town (both 12.3%) completing the top five.

Asia-Pacific (3.8%) pipped the Americas (3.6%) to the title of the strongest-performing world region, with Europe, the Middle East and Africa trailing (2.6%).

Sun locations continue to outperform city and ski markets, up 4.7% on average. Ski resorts are close behind (3.3%) and prime prices in the city market tracked have risen 2.7% on average.

Kate Everett-Allen, head of international residential and country research at Knight Frank said: “At the start of 2023, economists were expecting a much weaker outcome across global residential property markets. Stock markets were heading for more pain, inflation was veering out of control and the pandemic-fuelled property boom was set to end in tears as borrowing costs hit 15-year highs in some markets. However, that never happened – we’ve seen a much softer landing in terms of price performance around the world.”

As markets adjusted to the higher cost of debt, sales took a bigger hit than prices in 2023. In London, New York, Dubai, Singapore, Hong Kong and Sydney luxury sales declined on average by 37% year- on-year.

Some markets corrected after strong falls due to rapid rate hikes (Auckland, Seoul), while others moved up the rankings in part due to supply shortages (Sydney, Singapore). Some were influenced by policy and tax shifts, easing (Hong Kong), or tightening (Los Angeles), and some markets benefited from significant wealth inflows (Dubai, Miami).

Liam Bailey, global head of research at Knight Frank said: “As wealth portfolios recovered in 2023, affluent buyers targeted residential property in the world’s luxury markets. While 24% of global UHNWIs were active in the market, inventory was down by almost a third, adding upwards pressure to prices.”

Knight Frank Partner Erin van Tuil said: “Whilst volumes have dropped for Sydney’s prime residential market, values have not, demonstrating once again that Sydney remains a popular location to live and invest for high-net-worth individuals and ultra-high-net-worth individuals.

“Sydney also remains competitive as a global city for international investors, with US$1m buying you 10sq m more in Sydney than London, 9sq m more than in New York and 21sq m more than Hong Kong.

“The fundamentals of the Sydney market, such as lifestyle, transparent government and taxes and the sheer beauty of living in the Harbour City are unlikely to change, and therefore Sydney’s popularity is likely set to remain.

“With only so many waterfront locations available, for an ultra-high-net-worth individual, owning a slice of Sydney Harbour real estate remains a popular investment.”