Australia: A Mature, Stable Market for Cross-Border Investors

When buying property, there is transparency in the sales transaction and ownership, where the majority tends to be freehold. The world-class health and education system is admired by many and is set amongst a comfortable climate and environment.

Australia’s prestige residential market was subdued as the pandemic approached across sales, price and rental performance. At the time, the number of foreign buyers was modest relative to other global cities, and the pipeline of new homes was diminishing, although the number of Australian UHNWIs continued to rise.

When international borders closed, many expatriates came home to Australia. These expats either returned to their own investment home, which was being rented out, or required a home from the shallow number available in the rental pool. This placed, and continues to place, immense pressure on rental vacancies and encouraged double-digit prime rental growth to be recorded. Across Australia’s prestige properties, annual rental growth peaked in September 2023 at 16.4%, to 12.2% in June 2024.

Those lucky enough to buy a prime luxury home from the slim number of listings, were paying rapidly escalating prices with each month into the pandemic, with a 13.0% annual growth peak recorded in March 2022. Many locals were upsizing both their indoor and outdoor living spaces fuelled by their lockdown experience. Significant home renovations were being made by those selling, as well as those staying put.

A growing number of second homes were being purchased for holidaying with the family in a coastal village, or in the countryside through this time. Australians travelled locally given international travel was not readily available, and this allowed time to reevaluate their wealth portfolios. For this same reason, Australia’s foreign buyers across all price points, had mostly evaporated over this time to modestly recover to represent a 3.7% share in Q2 2024, according to the NAB Property Survey.

Current active buyers are now mostly those downsizing from a large family-landed home, to a well-sized apartment close to lifestyle amenities. Apartments provide security, privacy and lock-up-and-leave options for active retirees which is increasing their appeal. Many downsizers are cash buyers so have avoided the challenge of recent mortgage interest rate rises which have impacted first home buyers and investors getting into the market.

Whilst momentum has slowed for prime home sales in anticipation of a potential official cash rate reduction in the first half of 2025, there currently remains only a modest number of prestige listings when buying activity returns. This has influenced the prime residential price growth of 2.6% in the year to June 2024 across Australia, with an average 5% annual growth forecast for 2025. As potential buyers rent for longer, and the number of UHNWIs continues to rise after expanding by 2.9% in 2023, the shortage of new homes forecast prime rents across Australia to be 8% in 2025.

For more insights, please download the latest edition of Knight Frank’s Asia-Pacific Horizon series, Quality Life-ing: Mapping Prime Residential Hotspots, report below.