Kathryn House
Residential property prices continue to be a dinner party conversation topic in Australia. But while there have been signs of a softening in the broader residential market, the prestige sector, or at least pockets of it, seem to have been largely immune to the pressures of interest rate rises and slowing demand. Just this month, it was reported that Atlassian tech billionaire, Scott Farquhar, had sold his Point Piper Estate in Sydney for an eye-watering $130 million, and that could soon be eclipsed if Aussie Home Loans founder, John Symond, sells his nearby Wingadal mansion, which is said to have a price tag of over $200 million. Meanwhile, in Melbourne, the Myer family's grand Toorak estate has hit the market and is expected to sell for a record-breaking price of $100 million or more. There are also new prestige markets emerging with a $12 million house price record recently set in Newcastle. And cashed-up Australians are also taking their love of luxury to the seas, with keen interest in an apartment that's been listed for sale with a US$12.5 million price tag on The World, the largest privately owned residential yacht. But there are winners and losers, with some traditional prestige markets under pressure in the wake of COVID. I'm Kathryn House, your Talking Property Podcast host, and to spill the tea on what's happening in Australia's top-end residential market, I'm joined by Lisa Allen, Editor of The Weekend Australian's property magazine, Mansion. Thanks for joining, Lisa. I'm an avid reader of Mansion, and I'm looking forward to getting your take on what's happening in the prestige residential market.
Lisa Allen
Thanks Kathryn. Yes. I was amazed by the $130 million sale of Elaine given that it's half demolished and also, that it's to an unidentified local. I would've thought it would've been one of the cashed-up Mainland Chinese buyers that would've purchased it, but what a great way to kick off the Spring selling season.
Kathryn House
Yeah. It's going to be interesting to see who the buyer is when that comes out.
Lisa Allen
Yes.
Kathryn House
My second guest is Bader Naaman, the Head of CBRE's New South Wales Prestige Residential Valuations’ team. It's great to have you with us, Bader, given your expertise in the luxury residential sector.
Bader Naaman
Thanks Kathryn. It's great to be here. It is quite evident that this prestige market is operating independent of the broader market. It's really shown to be a strong and resilient market.
Kathryn House
Yes. It is interesting that it seems to have been immune to this broader market softening. We've seen auction clearance rates overall start to fall and interest rates are still remaining stubbornly high. Lisa, what are you seeing overall in the prestige sector?
Lisa Allen
I think it's going to keep firing on all cylinders, so to speak. I was talking to one agent operating in Bondi last week. He's launching a new project, and he's decided to just add $1 million to the asking price of the cheapest units in his luxury apartment block given the demand, and that's before the launch. That sounds ridiculous, but when you have car parks selling for a million dollars in Bondi, it makes sense. Then, we have forecasters saying newer apartment prices could jump by more than 20% by the end of 2026 fueled by interest rates and shrinking supply. Rents are also predicted to increase by 25% over the next five years as vacancies tighten, so I think it's still going to keep firing.
Kathryn House
Yes. I had to look for a rental recently and saw firsthand just what you get for your money at the moment. Bader, CBRE recently launched its first Prestige Residential Valuer Insights report. Could you talk us through some of the key findings?
Bader Naaman
Yes, sure Kathryn. On the back of launching our general Residential Valuations Property Market Survey, we decided to launch our inaugural Prestige Residential Valuations Survey which we received 35 responses from our team of dedicated valuers who really specialise in that high-end market. Our prestige valuers specialise in tight geographical locations, which from a prestige sense is extremely vital, given the specialised knowledge that is required to assess these complex high-end and unique properties. Some of the key findings that our valuers noted was that moderate demand in their local prestige markets with 40% reporting strong to very strong demand, which highlights the strength of the prestige market despite what is happening from an economic environment in terms of interest rate hikes over the last 12 to 18 months. It's no surprise to see that demand was strongest in WA, which is really boosted by that mining sector. Also, followed by Queensland and New South Wales which are proving to be resilient markets despite what is happening from an economic sense. That's on the back of strong population growth and really low, limited stock of high-end properties. The report also highlights that our valuers see demand has been the strongest for houses valued up to $10 million and houses valued between $10 to $20 million which typically, there's a limited supply of that stock, especially within highly established localities.
Kathryn House
So, Lisa, where are you seeing the hotspots right now? Is Sydney still the epicentre or I guess WA with that cashed-up mining population?
Lisa Allen
I think Sydney is still firing, but I also think the Central Coast is about to take off because it's a lot easier for people to get in there. Places like Long Jetty which is always seen as a bit of a... not great. Apparently, that's going to start-
Kathryn House
Poor country cousin.
Lisa Allen
Yes. Apparently, that's going to start firing. I mean, you can get a house up there for $1.1 million, and that... Okay. It's not going to be great, but it's like a three-bedroom, fibro house with one bathroom, but it's on a big parcel of land, about 500 square metres, and you could make that into something really nice. It's only three blocks back from a beautiful beach. So, according to the agents up there on the Central Coast, Long Jetty is the place to start looking.
Kathryn House
All right. So I need to be saving up to buy in Long Jetty.
Lisa Allen
Yes. I want to go up there and have a good look around. Friends of mine invested up there 10 years ago. They've had good rental returns. I reckon that's a really smart move.
Kathryn House
So are there some traditionally strong prestige markets that are struggling right now? I was reading a little about the Southern Highlands being an example where prices have really come down.
Lisa Allen
Yes. The lifestyle properties on the Southern Highlands, every second press release I get from the Southern Highlands is talking about price discounting, like two and three times on a lifestyle property in the Southern Highlands. It's because people don't want to pay these high interest rates. So they're having to sell their lifestyle farm in the Southern Highlands because they can't afford these high interest rates. So, I've spoken to a lot of agents down there, and they've said that there's also been this problem of vendor greed since COVID when prices of lifestyle properties, because there was a huge amount of people...you probably remember people were moving down to the Southern Highlands to get out of Sydney because they were scared about COVID. Now, they have this vendor greed mentality, and they can't sell their properties, and so they're having to discount, and discount, and discount again to try and shift them because they can't afford the mortgages.
Kathryn House
Yes and once you start discounting, it's really hard to stop that slide.
Lisa Allen
Totally, and so as I say, every second press release from the Southern Highlands is another discount. There are bargains galore down there.
Kathryn House
So what are you finding, Bader? Are you seeing any of the traditional prestige markets that are struggling a little?
Bader Naaman
Just to touch on that with the Southern Highlands in particular. I have noticed that there's been a large influx of stock within that, between the $4 million to $12 million range of properties, and they're more related to your hundred-acre allotments, and they're more of the properties that were more of the owner-occupier market. They were snapped up during COVID when people were trying to escape Sydney and all the COVID-19 lockdowns and whatnot. Then, there's just a massive influx of stock now that's hitting the market in that price bracket. And what's happening is obviously that most of these buyers now that relocated during COVID are now looking to come back to Sydney, and they also can't service their mortgage on top of their main mortgage in terms of what's happening with the interest rate movement over the last 12 to 18 months.
Kathryn House
So if we look overall, where is the prestige buyer interest coming from? Is it locals, offshore buyers, downsizers, or does it really vary by city and location? I know we talked about WA. A lot of interest from expats in the mining sector. Is there any general trend that you're seeing in terms of where the prestige buyers are coming from?
Bader Naaman
Yes, Kathryn. Really, what we're seeing is a mix of local wealthy downsizers that are looking for that ultimate lock-and-leave Sydney lifestyle. We're also seeing a mixture of cash buyers, regional cash buyers made up of downsizers looking for a lifestyle change. We're also seeing strong interest driven by wealthy expats who are returning home, having worked in cities like Hong Kong, Singapore, Dubai, and London. They've made some good money, and now they're trying to capitalise on the weaker Australian dollar. So, look, it is a mixture of overseas purchasers, local wealthy downsizers as well as cash buyers.
Kathryn House
What have you been seeing, Lisa?
Lisa Allen
Well, I'd agree with Bader. Like in Manly, a CBRE agent is telling me that there's a very high-end apartment block, and he said most of the people that have bought there are wealthy downsizers from within that suburb. So they've sold the grand family home and bought into the apartment block, paying $20, $22 million for each unit.
Kathryn House
That's incredible, isn't it?
Lisa Allen
Yes.
Kathryn House
Getting those prices in Manly now.
Lisa Allen
Yes, yes.
Bader Naaman
Yes, and I've noticed also, Lisa, that we are seeing a lot of wealthy downsizers who are purchasing properties in the eastern suburbs, in particular Darling Point, in that prestige unit market that we're seeing a lot of wealthy downsizers that are buying into there as well.
Lisa Allen
Yes, yes.
Kathryn House
So another interesting trend that I was reading about the other day in the prestige market seems to be flipping, and you look at CoreLogic data, it's really happening much more frequently in the prestige sector. So they analysed data from 2023, and four out of the top 10 most expensive houses sold last year were held for less than five years. Some of the sellers doubled their money after cashing in on strong demand given there is such a short supply as you mentioned earlier, Bader. I read about one example of a five-bedroom house in Vaucluse which sold for $37 million in '23, which was more than double the 2018 purchase price. So give me your take on the flipping. I saw you were actually interviewed recently on that, Bader.
Bader Naaman
Yes, that's right, Kathryn. I mean, as we touched on, there is a chronic undersupply of real premium stock in the market at the moment, And what we're seeing a lot of is that a lot of these buyers who would've purchased, say, within the last three to five years because of that really short, limited stock available, they're getting calls from agents who are just touching base with them and say, "look, we've got these buyers who are really keen on your particular property. Are you looking to sell? Are you happy to sell? I can get you extra $2 or $3 million within a short timeframe." These buyers, I mean, their mindset is different to the broader market. These prestige buyers, they're not looking to sit on a property for the next 10, 15 years. Their mindsets more of that three to five years even between that five to seven-year rule where they're looking to make a strong capital gain within a short amount of time. That's the mindset that these prestige buyers have. They're always on the go. They're always looking for something better, and that's what you get when you've got really a limited stock and strong demand in that prestige space.
Kathryn House
What are you seeing in that area, Lisa?
Lisa Allen
Well, I mean, similar to what Bader is saying. I mean, this person, this lifestyle blogger and fashion designer, she paid $43 million for a house that had sold the previous year for $30 million in Bellevue Hill nearby.
Kathryn House
That's extraordinary in such a short period of time.
Lisa Allen
I don't get it.
Kathryn House
No. I wish I had the money to be playing in that space.
Lisa Allen
Yes, me too.
Kathryn House
So maybe now is a good time to talk about emerging hotspots. In the intro, I mentioned Newcastle. Bader. What are your thoughts about some of the emerging places where the prestige markets are starting to heat up?
Bader Naaman
Yes. I think Newcastle is a great example of an emerging market, Kathryn. It's one to really look out for in the years ahead. I mean, look, you wouldn't normally associate prestige with Newcastle. Obviously, Newcastle is more of a working man's-
Kathryn House
Oh, be careful. I grew up in Newcastle, Bader.
Bader Naman
It’s always been more of a working-class environment, but more recently, we've seen a sale of $12 million over at the prestige suburb of The Hill. Not far from that, we also see a sale in July 2023 for $11 million over at Merewether, which is a popular beachside suburb. Just before that, there was another sale in Merewether for $10.25 million. So it just shows you that these prices that they're getting in Newcastle...I wouldn't say it's in line with Sydney obviously, it's far behind Sydney, but it just shows that there is a real emerging prestige market in that space.
Kathryn House
Yes. This might dent my retirement plans in Newcastle. You've also been doing a lot of work on Norfolk Island. Are you seeing that the prices there are holding pretty firm?
Bader Naaman
Yes. Norfolk Island is one of those lifestyle markets, which similar to the Central Coast of New South Wales, during COVID, a lot of people were obviously looking to escape COVID-19 lockdowns in Norfolk Island. Although it's 1,500 kilometres off the mainland of Australia, it's a location where a lot of people from mainland Australia, in particular, Queensland and New South Wales, they were buying sight unseen during COVID, and the prices just went through the roof during that period. It was similar to what we were seeing, obviously, with the lifestyle markets across New South Wales. Since then, the prices have corrected on the back of interest rate movements. However, the prices are still holding up quite well, and they are getting snapped up by a lot of purchasers from mainland Australia. As I said, New South Wales and Queensland.
Kathryn House
So are you seeing any emerging hotspots, Lisa?
Lisa Allen
Well, I really like the Central Coast. I also think that there's places around Hobart that are going to go gangbusters because they just haven't been developed very well. They're on beaches. I mean, it's Hobart. It's going to be cold.
Kathryn House
I love Hobart.
Lisa Allen
I do too. Love it. I think there's a lot of growth to be had in Tasmania. Like you, I love the place. So if I wanted to invest, I'd be looking down there. They had a huge growth spurt. It's come off. Prices are going down, and I think that's a great place to look.
Kathryn House
What about some of those traditional lifestyle hotspots like Byron and Noosa? I know you've written a lot about those.
Lisa Allen
No. I would not be investing in Byron. I mean, the median house price is now $2.3 million. It's expensive, and the surrounding suburbs like Lennox Head, Brunswick Heads, that's expensive as well. I mean, you just can't get into the market. It's pricey around there.
Kathryn House
What about the Gold Coast?
Lisa Allen
The Gold Coast. Well, that is shocking. I mean, only two weeks ago, Ray White put up a 90% completed apartment block on the market. People had bought their apartments, but they can't get them because the builder, Descon, went broke in May. So I don't know what's going to happen to those apartment buyers. Then, Sam Arnaout's Victoria & Albert apartment block on the Gold Coast, he rescinded all the contracts, $400 million worth of apartments, because the building price has gone up so much because of the cost of materials, cost of labour. So he said to all the apartment buyers, "if you want your particular apartment, you're going to have to pay about another 10% extra on what we originally negotiated." So it's tough up there.
Kathryn House
Yes. Queensland seems to have suffered the most with the construction cost price increases.
Lisa Allen
Yes, yes, but that's not stopping Harry Triguboff. He's powering ahead with his two huge towers, and he tells me that the sales are going extremely well. It's not from Chinese mainland buyers because as we know, they're not coming back at the moment, so it's locals.
Kathryn House
Locals or people moving from New South Wales to Queensland?
Lisa Allen
And people moving from New South Wales. But then, you hear a lot of people move to the Gold Coast from New South Wales, and then they move back.
Kathryn House
Yes, they have buyers regret.
Lisa Allen
Maybe.
Kathryn House
So, nationwide, are we seeing that trends are differing when you look at apartments versus houses? What do you think on that front, Bader?
Bader Naaman
I would say more recently, probably currently, we’re probably in this situation where we are witnessing the unit market perform more closely to houses given the significant value differences between the two markets. I mean, housing affordability has become a real issue in Sydney, Kathryn. Therefore, if the higher house prices and higher interest rates, the unit market is now seen as a more favourable avenue. Again, like the housing market, we're also seeing really low supply in that unit market on the back of a low supply pipeline. I mean, approvals and completions at record lows, lows that we haven't seen in the last decade. So when you factor all that in with that limited stock and more of an affordable option, we're seeing that market really grow, and it probably will grow into the near future as well on the back of anticipation that approvals and completions aren't going to be anywhere where they should be.
Kathryn House
Yes. So perhaps a little segue. I mentioned The World in my intro, and I know, Lisa, you recently took a tour of the ship while it was in port in Sydney. What's tempting prestige buyers to consider this as a lifestyle option, and is it true that Gina Rinehart is one of the owners?
Lisa Allen
Yes, she is, and I had lunch with a billionaire owner of Transfield on there. But what is tempting people is you can live on there all year, and you get to choose the itinerary with the rest of the residents. You have six restaurants to choose from, full-size tennis court, extremely large gym, swimming pools, and you're just waited on hand and foot. But the cost is an issue. So, as you said before, it's $12.5 million US to buy in there, but you have to pay 10% a year in marketing costs, and berthing costs, and food and beverages. So even though these billionaires, they can afford it, these marketing costs get to them after a while. A lot of them downsize after a while. So, 10% of $12.5 million, it's a lot of money, but it's just amazing.
Kathryn House
Yes.
Lisa Allen
When I was on there at White Bay, there was a table set. It was sort of bedecked with Lalique Crystal because one of the Australian residents was having a dinner party for 40 of his or her friends that night on board. Wouldn't that be lovely?
Kathryn House
Oh nice. That would be lovely. So it sounds like I'm not retiring on The World or in Newcastle at this stage.
Lisa Allen
I bought a lotto ticket that night.
Kathryn House
I think I need to do that as well. So are there any sales to watch in Australia right now? I know there's been a bit of talk about Barangaroo in Sydney. Lisa, what's the gossip there?
Lisa Allen
Yes. I went and toured the $90 million penthouse at Barangaroo with Steven Chen who's marketing it now after the ending of the previous agents, Knight Frank. Steven Chen has spent half a million dollars staging that penthouse to try and get a buyer. So it was initially listed a couple of years ago when the tower was built for $120 million. Price has come down $30 million. Can you believe it? Steven tells me that he's got a lot of very serious buyers. He hasn't put it out to the market, but he just tapped his special VIP list, and he reckons he's going to get it-
Kathryn House
He's gone into his Rolodex.
Lisa Allen
Yes, as you do. He's got a couple of very, very serious buyers, he reckons. So, hopefully he'll sell it before Christmas, but it is amazing. It's incredible.
Kathryn House
Are you seeing any interesting sales to watch out for at the moment, Bader?
Bader Naaman
Yes, Kathryn. Obviously, the one on everyone's lips is the John Symond's property, and everyone is waiting to see if that's going to hit $200 million or more, which will smash the current national home record which sits at $140 million. But there's also the Myer family grand Toorak estate over in Melbourne. That's one to look out for. Also, away from Sydney, I'm not sure if you've seen it, Lisa, but there's the one over at the Central Coast at Killcare Heights for John Singleton to purchase his resort-style acreage.
Lisa Allen
Oh, yes.
Bader Naaman
He bought it last year for just under $16 million. He paid $15.85 million. It's about to hit the market again, so that's one to look out for in terms of a lifestyle market as well. So I'd say look out for those, for those sales in the near future.
Kathryn House
So are we seeing any signs of distress in the premium market at the moment, Lisa? Any broad signs of distress, or it is staying relatively immune?
Lisa Allen
I think they're staying relatively immune. I mean, it's hard to say because normally, they pay cash. I mean, the mean part of my personality would like to see some signs of distress with these people, but no, it's ticking along. It really is. We're not seeing a stopping in some of the prestige agents or any of them going broke. I mean, they're powering ahead. They're taking a lot of ads. Mansion’s going really well with the ads. I mean, that's a barometer for me.
Kathryn House
Yes.
Lisa Allen
We are way above the ad budget, so that's how I can tell. I think things are good.
Kathryn House
What are you finding, Bader?
Bader Naaman
Yes, I agree entirely, Lisa. Obviously, that prestige buyer mindset, as we touched on earlier, is a different beast altogether. I mean, they are high-net-worth individuals. They've got easy access to finance, and a lot of them are cash buyers. Once you've got a lot of cash activity in the market, I mean, sales just keep happening and happening, and that's evident in the Eastern suburbs. So I think we had cash buyers who purchased properties across Darling Point, Bellevue Hill, and Bondi with nearly $2 billion worth of properties without debt. So that just shows that that real top-end isn't impacted by any interest rate movement at all.
Kathryn House
Well, thank you so much for joining today. It sounds like I am going to have to go out and buy a lottery ticket after this.
Lisa Allen
[laughs] Good one. Good luck.
Kathryn House
And Bader, great to get your insights and really interesting to hear about some of these markets like Norfolk Island where I've never been, so I might have to get myself up there to check it out.
Bader Naaman
You sure will. Thanks, Kathryn. Appreciate it.
Kathryn House
To our listeners, thanks for tuning in, and if you want to find out more about CBRE's Prestige Residential Valuers Report, you can find the link in our show notes. Also, make sure to subscribe so you don't miss future episodes of Talking Property. I'll be heading to Queensland soon to give you the download from the Property Council of Australia's Property Congress, and I'll also be getting some of Australia's key property decision-makers on the podcast in January to kick off the year with some key predictions. So, until next time.
