The big picture
It's not just about image. Luxury homes in exclusive locations virtually guarantee investors a continuous growth in property values, writes Peta Tomlinson
The old adage about buying the best you can afford is never truer than in relation to real estate. Prestige property may command a premium, but the best located homes and apartments also prove to be the best investments. Even during the slowdown in many of Australia's property market sectors, the highest end continues to outperform.
According to Murray Wood, New South Wales state director of Colliers International, the most prestigious real estate has an 'aspirational' value that remains unaffected by internal or external influences.
'The most exclusive locations in a prestige suburb of Sydney, Melbourne or Brisbane or any city in the world instantly conjure up an image of success,' Mr Wood says. 'Those addresses immediately give the owners kudos, and they will always be in demand by successful people. When they can buy there, they know they've made it.' That impetus guarantees a continuous growth in values, he says.
Though there are hero tales of astute buyers - usually on Sydney's waterfront - who have doubled their money in just a few years, the bigger picture is impressive enough. In Australia, housing for the super-rich starts at A$8million-plus (HK$57.7million), and this sector has consistently increased in value from 7 to 10 per cent over the past five years.
Mr Wood says the demand for such property is always underlying, even more so in recent times, and particularly from overseas buyers who want a piece of Australia's prime waterfront before it runs out. Demand for luxury apartments (approved by the Foreign Investment Review Board) has been especially strong over the past 18 months, he says.
'Colliers has just sold A$30million worth of stock through our Asia business without an expo or an advertisement. The buyers were mostly from Japan, Singapore, Hong Kong and Dubai, who recognise that they must act now because in three or four years there may be little or no supply.' Overseas buyers also know that Australia's prized waterfront is protected under planning, that they 'won't have uncontrolled development on their doorstep'.
Mr Wood adds that an extra attraction for offshore investors is that the Australian market does not see the considerable fluctuations that other international markets experience.
'Australia's economic and political stability gives the high-end market an added security platform over other international markets,' he says.
The latest research from CBRichard Ellis confirms that prestige property is 'absolutely' the best investment. The most recent quarterly figures available (September 2007) showed that many affluent suburbs of Sydney were experiencing strong growth, while much of the remaining market recorded little or no gains.
Elite suburbs of Melbourne have also 'consistently outperformed', CBRichard Ellis notes. Suburbs showing the strongest capital growth are typically within a 5km to 10km radius of Melbourne's Central Business District, where the median price rose 10 per cent in the quarter and 20 per cent over the year.
'Supply at the luxury end of the market is always limited, and this leads to strong price growth,' says Tim Rees, CBRichard Ellis senior director, residential projects.
A recent trend that CBRichard Ellis has identified is the closing price gap between luxury houses and premium apartments. Traditionally, Mr Rees says, Australians preferred to live in houses. This has changed over the past 15 years as the lifestyle benefits of well located luxury apartments are increasingly appreciated by the 'empty nesters' - the 55-plus age group whose children have left home - and younger, high-achieving executives.
'The empty nesters who can pay cash, or the thirtysomething professionals who receive large corporate bonuses, are driving demand for premium apartments,' he says. 'They want a better lifestyle - which includes views, luxury, a spacious layout and city convenience - and are prepared to pay a premium to get it.'
Mr Rees is not surprised that the latest data shows premium properties continuing to outperform other market sectors. 'It's all to do with fundamentals, and when you have a limited supply of a quality product, there will always be demand.'
CBRichard Ellis data also shows that investors are returning to the Australian property market as yields increase. Yet the rental market will remain tight with demand not meeting supply, pushing rents even higher.
As for the next big thing, Australian Property Monitors is betting on Sydney - and specifically, apartments. While Melbourne property investors 'have hardly been able to stop smiling' as house prices soared last year, general manager Michael McNamara expects 'the Sydney apartment market to emerge from the doldrums to post strong growth in 2008'.
'Sydney house and unit values have been the laggard of the Australian property market for more than four years now,' he says. 'With Sydney apartments looking so cheap compared to other capitals ... we have Sydney apartments as our No1 pick for growth over the next few years.' The bounce back of Sydney's residential market had been forecast earlier by CBRichard Ellis, which stated last year that investors would return this year after a three-year lull. As a market indicator, it noted that with rental returns at an all-time high, developers were starting larger projects in prime Sydney locations.
Of these developments, Mr Rees has selected two as prestige properties. One is North Residences at Milsons Point. Designed by Andrew Andersons of PTW Architects, with interiors by Archer+Wright, North Residences will comprise 76 luxury apartments over 15 levels located within a tightly held peninsula.
The sub-penthouse apartments feature stunning views over Lavender Bay, the Sydney Harbour Bridge and the city skyline, and have a net internal area of 244 square metres plus terraces of about 62 square metres with two car spaces plus storage. They cost A$6million. North Residences is a joint venture development by Australand, Rebel Property Group and Capital Land Australia.
The other prestige property earmarked by Mr Rees is Onslow, Elizabeth Bay.
'Onslow presents a rare opportunity to own a magnificently proportioned apartment in one of the most sought after locations in Sydney,' Mr Rees says.
'Designed by multiaward-winning architect Andrew Andersons of PTW Architects, Onslow is set to comprise just nine apartments, each featuring soaring 3.2-metre high ceilings with incomparable finishes. The premium apartment in Onslow features a net internal area of 429 square metres with terrace of 110 square metres plus three car spaces and storage with sweeping harbour views to the Heads.'
The price is A$13million.