The latest prime property price data from international real estate firm Knight Frank shows that they have increased by 7.9% over the year to the end of June 2013. This follows negative growth of 0.9% in 2012.
The rebound in prices is attributed to improving confidence among buyers as a result of lower interest rates, improved market liquidity and a strong rebound in the share market.
The Knight Frank report also says that vendor discounting has lessened as confidence has returned, supporting prices. Nevertheless, buyers are still price and product sensitive and we expect this to restrain price growth at the lower end of the prime market as the year progresses.
The recent change of leadership in Australia and a formal election looming over the coming months mean the market may enter a holding pattern until later in the year. Knight Frank forecasts price growth for the remainder of 2013 is around 5%.
‘The lower interest rates, which are at a 53 year low, and increased market liquidity in lower price brackets has seen a rebound in volumes and auction clearance rates. However, the market remains relatively balanced between vendor and purchaser expectations,’ the report explains.
‘This has seen the broader mainstream market record some flattening out in prices over the first half of 2013, albeit strong results continue to be achieved for the best properties,’ it adds.
Prime property prices in Sydney remain 17% below December 2007 levels. But comparatively, property prices in the mainstream property market have grown 14% over this time predominately driven by a huge injection of monetary and fiscal stimulus.
‘However, with the bottom of the prime market being reached, we expect the gap in performance will begin to close,’ the report points out.
‘There will be continued demand from Asian buyers, particularly from China. At the top end of the market, two of the largest recent prime deals were sold to Chinese buyers,’ it adds.
Knight Frank expects continued buyer activity in the Australian residential market for the rest of the year, with buyers coming from China, Singapore, Malaysia, Indonesia and India.