Knight Frank has released their 2022 Rightsizing report, which analyses data across the luxury residential market. The report outlines that the rightsizing sector is leading the luxury market, but a supply shortage is looming.
Rightsizing is when a homeowner downsizes from a home to a luxury apartment. Those Australians who are rightsizing are currently dominating activity in the residential markets, accounting for the top five percent. Rightsizing was occurring well before the pandemic, and while the last 18 months has slowed progress, many are looking to do so in the future. The only issue though, is the limited supply on offer.
Three trends can be attributed to the surge in demand: firstly, Australians seeking a low maintenance, high-quality home environment with house-like proportions for entertaining; secondly, those seeking a secured luxury apartment residence that can be easily locked-up and cared for when they jet-off for long periods of international travel again next year; or thirdly the emerging trend from the pandemic of those Australians who have embraced the concept of a co-primary home, where the second (holiday) home is almost equal in every way to their main residence.
Prices for new prime apartments and established prime apartments in high-rise projects have grown substantially in the last six years – rising up to 36 percent since June 2015, driven largely by the rise in demand from the rightsizing buyer where the pipeline of new apartments being developed is not meeting this demand.
In contrast to increasing demand, the pipeline of new apartments in prime regions around Australia will fall by 39% over the next three years across low-rise, mid-rise and high-rise projects. This will mostly be felt in Brisbane and Sydney, while Perth and the Gold Coast will welcome some new supply to ease pressure in their cities. The number of sites suitable for development of residential apartment buildings have also been steadily declining since 2014. The pandemic has also accelerated supply issues for both materials and skilled workers needed to facilitate residential development across the country.
“Rightsizers have remained active in the Australian property market over the past year, with prestige sales data highlighting the continually increasing appetite of buyers for both primary and secondary homes. Though these Australians are prepared to spend what it takes to fulfil their rightsizing requirements, the widening gap between this buyer demand and appropriate property supply remains concerning, and residential construction difficulties continue to delay delivery of new products,” says Knight Frank’s Head of Residential Research, Michelle Ciesielski.
The upward pressure on the prime residential market has seen super-prime apartment sales surge, meaning that properties with an average value of $10 million in Sydney and Melbourne and $7 million in Brisbane, Perth and the Gold Coast are at the centre of this high demand. This super-prime apartment market is tightly held across Australia – despite steadily expanding over the past decade there was only an average of 8.7 sales transactions per year from 2011 to 2020. Outstandingly, the first half of 2021 increased by almost eight times the 10-year average, 70 percent of those being sales of Sydney’s Crown Residences at One Barangaroo.
This is evidence of the growing trend amongst rightsizers seeking branded residences, with Knight Frank’s Global Buyer’s Survey outlining Australia’s appetite for branded residences is well above the global average, at 44 percent compared to 39 percent.
“Although the pandemic encouraged standalone prime house price performance to overtake the apartment market, it also accelerated the concept of the co-primary home. For many rightsizers in the prime residential market, they are seeking a bolthole in the city in preparation for business activity returning to the office environment, whilst also taking residence in their country and coastal second homes,” says Ciesielski.
“Over the coming years, we will see increasing numbers of rightsizers who are seeking a low maintenance home as their main residence, given the transient global lifestyle that will return for many of the ultra-wealthy population. This pent-up demand will continue whilst we know new luxury apartment delivery and sales listings remain shallow across almost every prime region of Australia.”
To read the report in full, click here.
