Strategically implemented to drive economic momentum in response to global uncertainty, recent interest rate reductions have seen most lenders adjusting mortgage rates in response with many anticipating more on the horizon
Although prestige sales volume has been sluggish, akin to the stock market, record super-prestige prices are still being achieved in affluent pockets across Sydney
Winter/25
Sydney Prestige Residential
Price growth for Sydney prestige homes could be best described as being in a holding pattern for the first part of 2025, although improving buyer sentiment is forecast for the next two years
A slim number of rental homes remain in this top end of the market which have resulted in prestige rents continuing on an upward trajectory, although going forward, will likely be at a slower pace
The Economy Key Drivers
Interest Rate
3.85%
The Reserve Bank of Australia (RBA) lowered the interest rate target 25 bps to 3 85% in May 2025 Many banks followed this direction and adjusted their mortgage lending rates accordingly. Interest rates significantly influence the cost of borrowing money, which in turn affects the willingness and ability to apply for a home loan. The RBA forecasts the target could be 3 40% by the end of 2025, and 3 20% in 2026 When interest rates are lowered, borrowing becomes cheaper, which can stimulate demand for residential property and drive economic growth
Economic Growth 1.3%
Stock Market Return
-0.7%
There have been many instances of strong stock market performance being a leading indicator for an upward momentum in prestige residential price growth Australia’s stock market performance on the S&P/ASX 200 eased in the first quarter with -3 9% growth, to calculate a total annual change of -0 7% in the year ending March 2025 This comes after annual change of -5.5% in 2022, then solid annual growth of 7 8% in 2023 and 7 5% in 2024
Economic growth remains a key driver given it can increase demand across property markets Australia recorded economic growth at 1 3% in 2024, following stronger performance of 3.1% in 2022 and 1.5% in 2023. Looking forward, the RBA forecasts economic growth to lift to 2 1% in 2025 and 2.2% in 2026. Ideally, sustainable economic growth is considered to be around 2% to 3% When it comes to new private business investment in Australia, there was 0 3% growth in 2024, following significant growth of 6.1% in 2022 and 8 8% in 2023 In 2025, business investment is forecast to rise by 0.6% in 2025 and 2.9% in 2026.
Wealthy Population Growth
3.9%
The wealthy population across Australia continues to increase, despite the extended period of global economic instability and geopolitical shocks. The drivers of wealth creation and maintaining this wealth have been real estate and the solid underlying performance of the stock market Australasia’s wealthy population grew by 3 9% in 2024, to 49,367 people with net wealth of more than US$10 million This population is forecast to grow by a further 5.3% by the end of 2028 (or an average 1 3% per year) according to the Knight Frank Wealth Sizing Model
Source: McGrath Research, Knight Frank Research, RBA
Prestige Residential Sales Update
Prestige Sales 220
Total Number of Prestige Sales ($5m+) Sydney Prestige
Sydney prestige residential sale transactions above $5 million tallied to 220 in the first quarter of 2025, a downward movement of 59% from the previous quarter This sudden pause was influenced by market hesitation with a federal election looming and many anticipating a further reduction in interest rates Over the past year, the total number of prestige sales was 3% higher, reaching 1,632 sales.
Source: McGrath Research
Super-Prestige Sales
While prestige sales volume has been sluggish, there does remain record super-prestige prices being achieved in affluent pockets across Sydney. The share of super-prestige sales (above $10 million) was recorded at 19%, after analysing the total number of prestige sales (above $5 million) across Sydney in the year ending March 2025. This was lower than one year ago when the proportion was 23%, and remains below the 21% share recorded five years ago Over the past year, Sydney’s super-prestige sales volume has fallen by 12%. but grown by 235% over the past five years.
Share of Super-Prestige Sales ($10m+), by Number Sydney Prestige
Source: McGrath Research
Sydney Prestige, Q1/25
Source: McGrath Research
Prestige Residential Sales Update
Duration 76 days
Prestige homes across Sydney took an average 76 days on market - from the time they were listed to the day they went under contract - in the March 2025 quarter This duration was 72 days the quarter before and 70 days one year ago A low number of days on market mean homes are selling fast with more desirable properties, while a high number of days suggests a slower market Houses averaged 72 days to sell in Q1 2025, which was 5 days longer than in Q4 2024 and 11 days more than in Q1 2024. Apartments took an average 80 days to sell, being 1 day longer than the previous quarter but 2 days less than a year ago
Average Days on the Market
Newly advertised property listings in Sydney were 14 1% higher in the month of March 2025 than the equivalent period last year. This trended above the 10.0% average for the combined capitals of Australia
Sydney’s total number of listings in the month of March 2025 were 11 9% above the equivalent period last year By comparison, total listings were an average 8.5% higher across the combined capitals of Australia
Source: McGrath Research, CoreLogic
Source: McGrath Research
Source: McGrath Research
Prestige Residential Prices Update
Prestige Prices -1%
A change in prestige property prices can provide a benchmark for market performance and can help identify emerging trends Sydney prestige property prices fell by 0.7% in the year ending March 2025, with a fall of 0.5% recorded in the most recent quarter Looking back at price growth over the five years from Q1 2020, prestige houses (23.6%) outpaced prestige apartments (17.9%). In Q1 2025, prestige house prices remained steady but were 0 8% lower over the past year In the same quarter, apartment prices fell by 1 3% after declining 0 5% in the past year
Change in Prestige Prices
Sydney Prestige
Source: McGrath Research
Prestige Price Outlook +1%
McGrath Research anticipates Sydney prestige residential prices to increase by 1% by the end of 2025, followed by a stronger 3% rise in 2026 These forecasts indicate a steady recovery in the prestige market over the next two years, driven by persistent demand amid limited available properties and reduced interest rates
Forecast for Prestige Prices
Sydney Prestige
Source:
Source:
McGrath Research
McGrath Research
Prestige Residential Rents Update
Prestige Yield +5 bps
Sydney prestige gross rental yields rose 5 bps in the Q1 2025 quarter to be 2 59%, while this was 5 bps higher than a year ago. Apartment yields (2.73%) consistently outperform house yields (2 42%) across most markets Prestige house yields rose 8 bps in Q1 2025 and increased by 21 bps over the past year, while prestige apartment yields were up 2 bps in this past quarter but were 8 bps lower from a year ago
Change in Gross Rental Yield
Sydney Prestige
Source: McGrath Research
Changes in rental vacancy can have a significant impact on the residential property market, influencing both rental prices and property values Sydney residential rental vacancy was recorded at 2.0% in Q1 2025, rising 10 bps in the quarter and in total, 50 bps over the past year Generally, 3% vacancy is considered a balanced market between rental supply and demand. Below this benchmark is considered to be an undersupplied pool of rental homes
Change in Residential Rental Vacancy
Sydney
Source: McGrath Research, REINSW
Source: McGrath Research
Prestige Residential Rents Update
Prestige Rents +1%
Sydney prestige property rents rose by 2 1% in the year ending March 2025, with a rise of 1.3% recorded in the most recent quarter Looking back at rental growth over the five years from Q1 2020, prestige apartments (44 0%) outpaced prestige houses (38.3%). In Q1 2025, prestige house rents were 0 6% above a quarter ago, but were 3 8% lower over the past year In the same quarter, apartment rents rose by 2 3% after rising 9 6% in the past year
Change in Prestige Rents
Sydney Prestige
Prestige Rental Outlook +3%
Alongside slow new housing completions, Sydney continues to hold a shallow number of prestige homes in the rental pool, despite a recent modest uptick of new luxury apartments completed within the city. McGrath Research forecast there will remain upward pressure on rents of 3% at the end of 2025, with a further 3% rental growth likely in 2026.
Forecast for Prestige Rents
Sydney Prestige
Source:
Source: McGrath Research
Source: McGrath Research
McGrath Research
Definitions
Prestige Property
The most desirable and most expensive property in a given location, generally defined as the top 5% of each market, by value
Prestige Sales
Sydney prestige sale transactions hold a threshold of A$5 million
Super-Prestige Sales
Sydney super-prestige sale transactions hold a threshold of A$10 million
Wealthy Population
A high-net-worth individual (HNWI) with a net worth of at least US$10 million
