Rich get richer on property, but may now have to settle for a smaller living room
The size of homes that can be bought for $1.6 million or more in most Australian cities has diminished as luxury real estate prices have continued to climb.
Luxury property continues to deliver capital growth for well-heeled owners but US$1 million doesn’t buy what it used to.
Prices for prestige real estate assets delivered modest – in the face of inflation – rises in most Australian capital cities, with Perth (5.3 per cent), Brisbane (4.1 per cent) and the Gold Coast (3.6 per cent) recording luxury property price growth equal to or above the global average over 2024.
Wealthy home owners in Sydney and Melbourne didn’t fare as well.
Prime property (generally defined as the top 5 per cent of each market by value) inched up by just 1.1 per cent in Sydney, while the service on the Porsche in Melbourne might be pushed back a bit, with the past 12 months delivering a 1.9 per cent decline.
Knight Frank’s The Wealth Report 2025 released on Wednesday (5 March) also revealed that while still relatively affordable compared to similar markets overseas, US$1 million (A$1.6 million) was buying far less than a decade ago.
The report found that the amount of luxury real estate you can get for your money has fallen by 33 per cent in Sydney and 19 per cent in Melbourne over the past ten years as prices have risen.
The report found US$1 million bought 67 square metres (sqm) of luxury real estate in Sydney in 2014, compared to 45sqm now, and in Melbourne that amount of money would buy 109sqm 10 years ago compared to 87sqm now.
In Perth the number of square metres you can buy for US$1m has actually increased by 9 per cent over the past decade, due to changes in the exchange rate, while in Brisbane and on the Gold Coast it has fallen by 13 per cent and 25 per cent respectively.
Where prime property is heading in 2025
Knight Frank Global Head of Research Liam Bailey said despite higher interest rates over the past four years in Australia, prime residential prices in Australian cities had largely remained on an upward trend.
“Shielded by cash buyers who are less dependent on financing and by lower supply, prime property prices in markets like Perth and Brisbane rose ahead of the PIRI 100 average in 2024,” he said.
“While buyers of the luxury real estate are less reliant on financing, the RBA’s decision to reduce rates at their recent February meeting signals a change in the market towards greater stabilisation and a strengthening of the economy.
“There is now improved sentiment and further rate cuts expected this year will restore momentum, however, we expect a moderation of price growth in Australian luxury property markets over 2025, in line with the mainstream market, due to factors including the federal election, ongoing geopolitical uncertainty and further interest rate cuts being unlikely until the second half of the year.”
Mr Bailey said Perth is again expected to lead luxury property price growth in 2025, with a 3 per cent predicted rise, followed by Brisbane and the Gold Coast with 2 per cent and Sydney at just 1 per cent. Melbourne prices are expected to remain flat, he said.
Melbourne’s CBD property market in 2025 is widely tipped to face challenges, with forecasts suggesting it may underperform compared to other Australian capital cities.
Analysts predict residential apartment prices could decline by up to five per cent in 2025, following a 1.6 per cent decrease in 2024.
But luxury apartments may be the exception, according to Perron King, Director, Herron Todd White.
“Despite the challenges, we anticipate certain submarkets to perform above the market average,” he said on Wednesday.
“These property types include high end apartments starting at a price point of $1.5 million.
“Premium units with large layouts and luxury amenities appeal to downsizers, families and foreign investors seeking centrally located, higher quality properties.
“A trend worth noting is sustainable and energy efficient features becoming a significant selling point.
“High quality, sustainable developments and premium apartments may outperform the broader markets.”
Adam Ross, Associate Director at McGrath Estate Agents, Knight Frank’s partner in Australia, said Australia’s luxury property buyers should not ignore the larger regional centres.
“We expect the two largest capital cities will lead the opportunities given the weight of money is heavily skewed there, but we can’t underestimate the further prestige opportunities across regional Australia like the Gold Coast, Byron Bay and the Mornington Peninsula.
“2025 could be the year for the most astute investors to upgrade their home as price growth is more conservative, but the challenge remains of finding the ideal prestige home to make the move in this tightly held market.
“At any price point in the prestige market, lifestyle plays a huge factor, especially when they seek a home positioned on the waterfront where buyers need to act fast when they come to market,” Mr Ross said.
Comparing international luxury property markets
The Wealth Report 2025 found prime residential prices continued on an upward trajectory globally in 2024, with an increase of 3.6 per cent, marginally up on the 3.3 per cent rise in 2023.
In Australia, Perth (5.3 per cent), Brisbane (4.1 per cent) and the Gold Coast (3.6 per cent) recorded luxury property price growth equal to or above the global average.
Perth recorded the highest luxury residential price growth of the Australian cities for the second year in a row, recording very similar growth of 5.2 per cent over 2023, while Brisbane almost doubled its growth rate of 2.3 per cent in 2023.
Michelle Ciesielski, Head of Research at McGrath Estate Agents, said Australia’s prestige property has increasingly become more competitive on an international scale, with the lower Australian dollar over the past year which is attracting expats to buy back home.
“For a local buying residential property with Australian dollars, prestige prices grew by 2.8 per cent in 2024 across Australia, however, analysis by McGrath Research shows that for a buyer using US dollars to purchase residential property, prices effectively were 6.6 per cent cheaper over this time.
“This currency advantage was as much as 7.2 per cent cheaper for those buying with Hong Kong dollars, 5.1 per cent with the British pound and 3.6 per cent with Singaporean dollars.
“We continue to experience growing buying activity with expats who are taking advantage of the favourable currency exchange and the strongest demand remains in well-established lifestyle locations for when they eventually return home.”
