Chapter 1: What are the current trends in the premium property market?
It's The Real Estate Podcast, brought to you by Ray White, the largest real estate and property group in Australasia. And welcome to another episode of The Real Estate Podcast, where we're going to be looking at premium properties with regard to some of the prices being paid and whether you can justify it or maybe another way of looking at it, is it worth it?
There is no doubt that at the end of lockdown, a supply surge unleashed on the market, which had a profound and expected result. And the huge spike in price growth experience throughout the pandemic has cooled somewhat. to more of a sustainable level, and I think that property buyers could be feeling a little bit more empowered by some of the choices out there.
However, prestige residential properties in prime locations seem to be the exception.
Chapter 2: How has the pandemic affected property prices?
Demand for these properties are still buoyant and lofty in prices. The premium property market appears to be more resilient than other price segments in the current climate. which we will talk about as well as the premium property markets in Melbourne, Brisbane, and Sydney. So to unpack a little bit of this to understand it better, we're joined by Rich Harvey from Property Buyer. G'day, Rich.
Welcome back to the podcast. Thank you, Craig. Always a pleasure to be with you.
Chapter 3: What factors drive high prices in premium properties?
And just talking about, I guess, Omicron and the positivity of the start of the year, even though we're well into February, just sort of has that feel, that kind of confidence that yes, while Omicron is circulating, there seems to be this sort of underlying current that we're sort of moving forward. Yeah, you're right.
I think I've just noticed talking to friends, family and other business owners that, you know, the sting in the tail for Omicron doesn't seem to be there. We're all majority of people are vaxxed. Obviously, people that have got it are having some pretty negative side effects, but it's not the sort of fear and dread that everyone had of catching it. It's almost like, have you had it?
Yep, I'm over it. And so there seems to be a bit of renewed confidence now with people getting back to school, back to work, back to uni and just getting on with life. And I think we've all wanted more of that normality back. And finally, let's get COVID behind us. You know, let's learn to live with it.
And that's translating into my own business, certainly a lot of steady inquiry and hopefully for other people about getting on with the year ahead. Oh, yeah. Yeah, we want to get on with things. We've sort of paid the price, haven't we, over the last couple of years. So, yeah, let's move forward.
Now, talking about positivity, these premium property prices, what is driving in the premium property sector these high prices? What we're seeing at the moment, primarily a drive to lifestyle. Premium property has always been the aspirational thing that the wealthy buyers want to get into and the suburbs they want to get into.
But what drives it primarily is supply and demand, the fundamentals of economics. If you look at the key reasons, it's location, it's amenity and it's demographics. If you want to break it down into those three things. So, you know, real estate's always about location, location, location.
And, you know, if you look at the most expensive piece of real estate in Australia on Wolseley Road at Point Piper, where there's $100 million homes on that street with point blank views to the Opera House, the bridge and the Inner Harbour area, you know, that's the pinnacle of premium real estate in Australia. And, you know, God's not making any more land.
If you think of all of the premium suburbs, they're highly sought after and there's very, very strong competition. So there's only so many properties that you can physically put into those areas. The other thing is they're very tightly held, Craig. They're not turned over very often.
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Chapter 4: Who are the main buyers in the Sydney prestige market?
If you look at the length of stay or the length of time between purchase and sale, it's not your average seven to 10 years. It's often a lot longer. It's held for generations and it might be passed on through different generations as well. So they call that the old money.
But a lot of these suburbs are either harbour-based suburbs, they're landlocked, they're, you know, you might look at sort of the Toorak, South Yarra, or in Brisbane, you know, Hamilton, those sort of areas closer into the city. They're very, very sought after.
So for me, it's the thing that drives it is proximity to amenities, being around like-minded people, and that aspiration to live in a beautiful suburb surrounded by beautiful homes. Yeah, what an aspirational goal that is, a $100 million property. Well, I think a lot of people mull over the prospect of buying into premium suburbs, but holding back many is the return on investment.
So Rich, good or bad idea to spend more? Yeah, look, it wouldn't be if I'm advising a client to buy an investment property, I'm not going to be saying, hey, let's, you know, put your first million dollars into all clues. Everyone has an individual situation. And it's all about looking at a client's, you know, long term goals and what's going to work for their personal financial situation.
Chapter 5: What is the situation in the Melbourne prestige property market?
You've got to be at a certain income and wealth level to buy in these areas. I mean, the median price in Mossman is $5 million. The median price in Vaucluse at the moment is almost $8 million. So it's pretty hard to save up a deposit of $1.6 million to get into those areas, right? But are they a good investment?
Chapter 6: How does the Brisbane property market compare to Sydney and Melbourne?
If you're wealthy, yes, absolutely. Because I've seen some incredible turnaround in a very short time. And when we seen last year, certain suburbs in Sydney rise 30, 35%. So that's been an incredibly good investment for people there. And look, why it is a good investment if you can afford to buy in these areas, as I've said, it's very tightly held. So the supply demand ratio is is very good.
You've got the types of people buying into these areas is expats. You've got cashed up locals and people that can afford to buy, say, $100 million home. People like John Simons, you know, who founded Aussie Home Loans. You've got a lot of wealthy business people who've built their wealth over many, many, many years. and reaping the rewards of being able to buy an incredibly prestigious property.
Look at the Atlassian guys that bought the Fairfax residence for $70 million a couple of years ago. There was another recent sale in Melbourne not long ago. The guy from the founder of Chemist Warehouse, he bought a property for $43 million in Lanzel Road. And people who have invested in those areas, done to take an extensive renovations.
I mean, you just got to do a drive around the eastern suburbs in Sydney and see all the building works that are going on, the renovation works and the hoarding and safety fences around those properties to see how much investment is going on.
Chapter 7: What are the investment considerations for buyers in premium suburbs?
You know, you used to talk about the crane index and you see what sort of level of activity is going on in the city. Well, just look at the level of number of utes on the side of the road and all the building signs up as it'll tell you how active a certain market is.
Chapter 8: What advice does the guest offer to potential property investors?
But yeah, In summary, I would say to buyers, look, don't think you have to be able to afford to buy in a luxury suburb to get into the property investment market. It's got to be very much a tailored approach based on your own individual situation. Yeah, and talking about those premium properties, the Sydney prestige market is leading the way, perhaps dominating.
So who's buying and where are they buying in Sydney in particular? Yeah, great question. Look, who's buying? It's local business owners. Some people have done pretty well in crypto, a lot of tech entrepreneurs. There's sort of been a couple of our clients over the last couple of years. They're certainly buying in Sydney. We're also seeing a lot of older country-based retirees.
They're also making inquiries and coming back and going, look, I've done my time in the bush. I want to retire to a nice luxury inner city apartment or something with a harbour view. So we're also seeing another group is expats, and they've certainly returned en masse.
The last two years with the COVID phenomenon, they're really coming back to the safe shores of Australia and snapping up whatever they can. And also a lot of people just within the same area, like within the northern beaches, the North Shore and the eastern suburbs, for example, are just wanting to upgrade their digs.
They've perhaps had their family, they've done the family home and now wanting to sell out of that and to buy something else. So that's the sort of the groups of people. In terms of this particular pockets that we're seeing that's pretty strong, it's a lot of those what we call high-octane beachside suburbs like Bronte and Clovelly.
And in some of those areas, you know, you think $5 million will buy you something, but it doesn't these days. The entry point now is actually more around $10 million. to get into those suburbs. So areas just a bit further south of Bondi, Bronte Clovelly, beautiful beaches, just a great cafe lifestyle. You've got a beautiful walk there, the Bondi to Clovelly walk.
So a lot of people are buying into those areas. We're also seeing... A bit of a resurgence in some of the areas like Double Bay, Bore Clues, Rose Bay, and even Dover Heights to some extent as well. But it's those inner foreshore areas that are always at a higher price point than, say, Dover Heights, which just has the ocean views. It doesn't have the inner harbour views.
I guess in summary, Craig, in the Sydney market, they're very discerning buyers. They're very, very particular and they have a very particular taste. And a lot of families want to be close to those top educational schools like, you know, Canbarla and Kincopple, et cetera, as well. And what about the Melbourne prestige market? What's happening there?
Yeah, the Melbourne market is really running hot too, Craig. We've seen some pretty outstanding results. I mentioned that one at $43 million for the Chemist Warehouse guys. But you look at a suburb like Toorak, its median price is now $5.1. And we're seeing those areas are starting to see a little bit more turnover, but not a lot.
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