Sydney luxury residential to run second only to New York in 2015: Knight Frank

New York ranks first, with Sydney sitting in second place when it comes to the latest Knight Frank forecast for 2015 luxury residential market price growth.

Rising business confidence and an increasing sense of political stability is helping to attract interest in Sydney from overseas, the Prime Global Cities Forecast report from Knight Frank said.

It tips 5% price growth in 2015 for Sydney luxury property markets.

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"The weak Australian dollar is adding to this momentum and also reviving interest from Australian expats," Knight Frank researcher Kate Everett-Allen said.

Knight Frank’s Global Cities Report has eight cities included in its forecast.

New York is back on top with luxury prices across Manhattan expected to accelerate by 5% to 10% over the course of 2015, with strengthening foreign interest from Chinese, British, Russian and Latin American buyers.

"Sydney is also on the radar of foreign buyers but here limited luxury supply is pushing prices higher, so we forecast by up to 5% in 2015," Knight Frank wrote. 

The report noted Sydney was a beneficiary of the flow of wealth from economic or political crisis locations into ‘safe-haven’ markets.

"In markets like London, Sydney and New York, these flows tend to reinforce demand for established market neighbourhoods, with buyers focusing on wealth preservation and looking for mature and stable markets," according to Knight Frank.

The report pinpointed Sydney's eastern suburbs and the lower north shore.

But the report noted their was a risk of potential political interventions in the residential property markets given the prospect of "further debates" in Australia.

"The rising level of cross-border investment is likely to contribute to further debates in other parts of the world in 2015 (Canada, Australia, Dubai) on the impact of foreign buyers on local residential market affordability and stability," it said.

It noted the House of Representatives Standing Committee on Economics had delivered its review into foreign investment in Australia’s residential property market. 

"No additional restrictions have been placed on foreign purchasers buying in Australia but a list of recommendations have been made to ensure the rules are more rigorously enforced."

"The Significant Investor Visa program that attracts high net worth individuals will be refined and a Premium Investor Visa will be introduced on 1 July 2015; a more expeditious pathway to permanent residency for those meeting a $15 million threshold."

The Sydney forecast noted low interest rates are forecast with banks keen to lend at competitive rates.

The report noted luxury residential markets face a diverse range of challenges and opportunities in 2015, but now that stimulus measures have all but disappeared in the US and the UK, all eyes are on Europe and Japan and the extent to which they could halt the tentative global recovery.

"Of the eight cities included in our forecast we expect two to experience prices gains, one to see prices remain stable and five to see prices decline."

Dubai sits at the bottom of the Knight Frank forecast with prime prices expected to slip by 5% to 10% as limited supply and a growing appetite from Indian purchasers should cushion the market.

Source: Knight Frank

The full Prime Global Cities Forecast for city by city analysis by Kate Everett-Allen, says residential markets in the world’s leading cities are well-positioned to benefit from both the peaks and troughs of the global economy.

“As there are more purchasers in the prime end of the market, prices are now being achieved closer to the original asking price and in most instances, this was set by the owner several years ago," Knight Frank Australia associate director of residential research Michelle Ciesielski said.