Miklos Bolza| Australian Broker| 13 June 2017
Australia has experienced an upward trajectory in property prices over the past year, pushing it up the international leader board of property growth rates.
Knight Frank’s Global House Price Index – Q1 2017 saw Australia move from 37th in the fourth quarter last year to 20th place by the first quarter this year.
In the most recent quarterly index, Australia recorded an annual growth rate of 7.7%. This was higher than the international average of 6.5%, which is the highest annual rate of growth in three years.
“Over the past five years ending Q1 2017, the Australian housing market averaged 5.8% annual growth in prices, while over the same time, global capital growth averaged 2.9% per annum,” Knight Frank’s Australian head of residential research, Michelle Ciesielski, told Australian Broker.
“The momentum in house price growth picked up in late 2016 for Sydney and Melbourne, and this flowed through to dominate the uptick in the national result.”
Eleven countries in the Index had annual growth rates of more than 10% with Iceland topping the list at 17.8%. This was followed by Hong Kong (14.4%), New Zealand (13.8%), and Canada (13.5%).
“Australia last saw annual double-digit annual growth in Q4 2015, when house prices grew 10.7% as Australia ranked in 4th position,” Ciesielski said.
“Since this time, the ability to source lending finance has tightened for both local and foreign investors, mortgage interest rates have increased despite the official cash rate remaining low. Demand is still strong with population growth driving Sydney and Melbourne prices, with good prospects for employment with construction heavily dominating the skyline, especially in Sydney with the pipeline of infrastructure over the next decade.”
Recent global uncertainty has been one driver for high growth rates in countries such as Australia, Canada and New Zealand, she said, with investors putting money into safe asset classes such as property in countries seen as safe havens.
Comparing Australia with the rest of the world in terms of property prices, Ciesielski pointed to research done by Knight Frank in Q1 2017 which looked at the amount of prime residential real estate (in square metres) which could be purchased with US$1m.
“Ranked 8th globally, 53 sq m of prime internal residential area could be purchased in Sydney (down from 59 sq m in Q4 2016). Melbourne was close to double, ranked 16th globally, with buyers being able to purchase close to 102 sq m with their US$1 million; equivalent to almost six-times the accommodation size of the highest priced cities in the world. Monaco remained the most expensive, covering only 18 sq m, followed by Hong Kong at 19 sq m, New York at 26 sq m and London at 30 sq m.”