Rightsizers Driving Rise of Ultra-Luxe Apartments

Sydney is arguably one of the most enviable places in the world to live, and it continues to attract investment into luxury property.

As such, prime property prices, the top five percentile by market value, continues to record growth increasing 10.7 per cent in the 12 months to September 2021.

While the beauty of the city’s luxury houses could hardly be questioned, demand for apartment living in Sydney continues to increase and will pave the way for luxury living in Sydney’s future.

Recent research by Knight Frank reveals that 73 sales of super-prime property in Sydney, homes valued over US$10 million (A$14 million), were recorded in the second quarter of 2021, up 138 per cent on last year.

Contributing to this sales surge is the purchase of super-prime apartments. In the first half of 2021, Sydney recorded eight times the 10-year average of super-prime apartment sales.

The desire for apartment living has been documented by global research by Knight Frank—of buyers surveyed, 38 per cent are looking to cities for their next property purchase, and demand for apartments has increased to 19 per cent from 12 per cent last year.

So what’s driving this surge to apartment living? At face value, it’s likely that this reflects demand for larger more spacious apartments and mid-week bases in city centres.

However, when you dive a bit deeper in Australia, a trend named “rightsizing” continues to sweep the prime property sector.

Rightsizing is the move from large free-standing houses to luxury apartment living, providing homeowners with a wealth of lifestyle benefits. In making this move, buyers are offered a hassle-free lifestyle, over the maintenance that comes with free-standing homes.

There are three trends behind rightsizing recorded in recent months: Australians seeking a low-maintenance, high-quality home environment with house-like proportions for entertaining; 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; and the emerging trend from the pandemic of those Australians who have embraced the concept of a co-primary home, where the second home is almost equal in every way to their main residence.

Crown Resorts, the developer of Crown Residences at One Barangaroo, identified early the demand for this calibre of home and the 76 luxury residences have now recorded more than $1.1 billion in sales to October, 2021.

This includes record sales of five transactions over $40 million and 16 over $20 million.

Knight Franks has found that the Australian buyer appetite for branded residences is well above the global average, at 44 per cent compared to 39 per cent.

For 48 per cent of Australian respondents, the key motivation for purchasing a property in a branded residence development was the service provision and physical amenities available.

With the population of ultra-high-net-worth individuals forecast to grow 3.8 per cent annually over the next five years, developers of future homes would be wise to account for this increased demand for luxury apartment living, as well as the hotel-branded residences concept.

Differentiating the offering of service and amenity available will be a crucial means to attract buyers to new apartment complexes.

Traditionally in Australia the quality of apartments increases as you get higher in the building, with penthouses the pinnacle. Ensuring that all homes within the building are finished to the same high quality will mean that homeowners can choose within what part of the building they want to live in without compromising on quality.

Similarly, it’s recently been observed that not all homeowners seek the highest view within a building. By offering a mix of apartment sizes all the way up a building, developers better cater to all.

As prime property prices continue to grow in Sydney and the ultra-high-net-worth individuals population continues to increase, so will demand and desire for a new era of luxury living.

Author

Erin van Tuil
Partner, Knight Frank Australia