Sydney Forecasted to be World’s Strongest Performing Luxury Market in 2021; Matched by London in 2022

According to a new Knight Frank report, global luxury home prices are expected to grow faster than predicted only six months ago, with Sydney leading the pack for 2021.

Sydney tops Knight Frank’s prime residential price forecast for 2021, with premium prices anticipated to climb 10 per cent year on year.

However, in 2022, Australia’s largest city will share the top place with London, with both cities expected to experience a seven per cent increase in prime prices year on year.

This increase would be the best annual price performance in prime central London in nearly seven years.

Knight Frank Australia’s head of residential research Michelle Ciesielski said the forecast represents the strong growth of the local luxury market.

“Every quarter since March 2013, Sydney’s prime residential market has recorded positive annual price growth demonstrating the ongoing undersupply of luxury prestige homes being built whilst our ultra-wealthy population continues to rise,” she said.

“Many of our ultra-wealthy clients are now embracing the low interest rate environment to expand their property portfolios further, as they redirect funds into their business interests, the stock market and other investments.”

The first quarter of 2021 witnessed 1429 prime sales, the biggest quarterly total on record for Sydney. Source: Knight Frank.

Ms Ciesielski said despite economic headwinds in recent weeks, the underlying fundamentals remain strong.

“As wealth creation continues amongst Sydney’s elite, the thin number of prime luxury property listings has pointed towards further price growth in the second half of 2021,” she said.

“The past three consecutive quarters has resulted in the highest number of prime sales transactions on record, so this mounting turnover suggests there is still depth in the market for 2022 especially given Australia’s international borders are likely to remain closed for the foreseeable future.

“Although lockdowns are currently in place, exclusive viewings are custom when buying prestige residential property and in many instances off-market purchases were already taking place with ultra-wealthy Australians who have been grounded on home soil for the past 16 months.”

The first quarter of 2021 witnessed 1429 prime sales, the biggest quarterly total on record for Sydney, and momentum is being sustained despite recent lockdowns.

Strong forecasts for the world’s luxury markets

Knight Frank’s worldwide research team has conducted three prime price predictions since the COVID-19 outbreak began in early 2020, with the average overall estimate tracking upward each time.

Back in May 2020, Knight Frank predicted that prime prices would rise by one per cent on average in 2021; by December 2020, this had risen to three per cent, and by July 2021, it had risen to four per cent.

Hong Kong and New York aren’t far behind Sydney in forecasted growth, with their 2021 predictions increasing by five per cent and four per cent, respectively, between December 2020 and June 2021.

Like London, the four per cent price rise predicted by Knight Frank for 2021 would represent New York’s return to positive price growth for the first time since 2018 and its best performance since 2015.

Knight Frank head of international residential research Kate Everett-Allen said government fiscal stimulus, tax and lending settings, bank mortgage holidays and increased household savings have led to the increased forecast.

 Global Prime Price Forecast by city  – Annual % change (as at June 2021) 

City20212022
Sydney 10% 7% 
Miami 6% 4% 
Los Angeles 5% 5% 
Hong Kong 5% 5% 
New York 4% 3% 
Paris 4% 4% 
Geneva 4% 6% 
Singapore 3% 5% 
Auckland 3% 4% 
Madrid 3% 6% 
London 2% 7% 
Source: Knight Frank

The prognosis for top residential markets is directly linked to the ease with which cross-border transactions may begin to normalise, according to Knight Frank.

While virtual viewings and enhanced technology have aided in this area, the truth is that the restoration of commercial air travel will be critical, the report said.

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