A recent study finds four Australian capitals in the top 15 globally based on average property price growth.

While Manila topped Knight Frank’s Prime Global Cities Index (PGCI) over the year to the end of September, with 21.2% growth in residential prices over the past 12 months, Sydney recorded the highest growth of the Australian cities (4.2%), coming in at number eight.

With the top end leading the upturn, Sydney house prices have recovered most of 2022’s falls and are 0.03% below the February 2022 peak, with prices increasing a further 0.48% in September and 0.37% in October according to Proptrack.

Based on CoreLogic data, Sydney dwelling prices:

  • Increased 24.5% from the onset of covid to their cyclical peak in January 2022.
  • Dropped -13.8% from their cyclical peak to their recent trough in January 2023.
  • Have risen 10.6% from their trough early this year (January 2023).

What appears to have put a rocket under the $15m-plus end of Sydney’s property market is cashed-up Chinese buyers who are looking for guilt-edged bolt holes in prestigious suburbs like Vaucluse and Bellevue Hill.

But China aside, since Australia reopened its borders post-pandemic, international agents are experiencing a four-fold uptick in inquiries about Australian property.

Interestingly, this uptick is reflected in recent property data, with a recent NAB residential property survey revealing four consecutive increases in the share of total market sales to foreign buyers.

The three other Australian capitals to make it into the top 15 based on price growth were:

  • The Gold Coast came in at number 11 with growth of 3.9%.
  • Perth is in 12th place (3.8%).
  • Brisbane is in 15th place (2.5%).

Melbourne came in at number 26 on the global list, with growth of 0.7%.

Buoyed by strong demand and low supply, all Australian markets delivered positive annual growth, however negative quarterly movements in Perth and Melbourne point to limits to growth in the current cycle.

Dubai & Shanghai

While Dubai (15.9%) and Shanghai (10.4%) came in second and three place respectively, this quarter – Q3 2023 – was the first time in eight quarters that Dubai was knocked off the top spot.

Closer to home, in the Asia-Pacific region, Seoul’s annual growth significantly improved, moving the city from 39th place in Q2 to 7th place this quarter in the ranking.

Knight Frank attributes a boost in market demand in Korea to the Bank of Korea maintaining its 3.5% base interest rate in October.

On the flipside, Singapore’s market is experiencing annual price declines, due in part to the impact of higher stamp duties on foreign buyers, while prices continue declining in Hong Kong with a 0.6% drop in the quarter leading to a 1.7% annual decrease.

Lingering uncertainty

Overall, Knight Frank data shows that prime residential prices, across 46 cities worldwide, experienced 2.1% average annual price growth. This is the strongest growth rate recorded since Q3 2022 and reflects 67% of cities seeing growth on an annual basis.

With only 63% of all markets witnessing an increase over the quarter, Knight Frank attributes lingering uncertainty to the potential for further interest rate hikes.

The report notes:

“Ongoing uncertainty over inflation and interest rate risks continues to weigh on all levels of the global housing market, including the luxury segment, and is likely to limit price growth in the medium term.”

While market demand for residential property has improved in several markets, contributing to improvements in Knight Frank’s index results, the report concludes that revival in demand is fragile and could be pushed off course if inflation surprises on the upside.

“The improvement in average annual house price growth will be welcomed by prime market homeowners but shouldn’t be overstated,” said Knight Frank’s global head of research, Liam Bailey.

“Higher rates mean we have moved into a world of lower asset price growth – and investors will need to work harder to identify opportunities for outperformance to secure target returns.”

City 12-month % change 6-month change % 3-month change %
8 Sydney 4.2 0.9 0.5
11 Gold Coast 3.9 2.4 0.8
12 Perth 3.8 3.0 -0.6
15 Brisbane 2.5 0.5 1.1
26 Melbourne 0.7 -1.8 -0.7
Image: Sydney.com