Record home sale shows top end is back… but will the fear of rising sea levels deter future waterfront purchasers?

A Perth mansion recently sold for $57.5 million dollars – a new record price for Australian real estate.  It is clear why the property, which was originally listed for sale at $70 million, fetched such a landmark value at sale.  There were three self contained homes, cinema, pool, tennis court, gym and boathouse on more than 7,500sqm of north east facing land featuring 115 meters of frontage along one of the most exclusive stretches of waterfront land in the nation.  The view from the home is one of the most extraordinary:  north east along the Swan River and the suburb, Mosman Park, is one of the countries most exclusive and desired residential locations.

43 saunders close view

It is interesting to know the property was originally purchased back in 1992 as vacant land for just $400,000.

Apart from the huge price tag, this recent record breaking sale sets the scene for two other related topics.

Firstly, the sale demonstrates the surge of confidence amongst premium property buyers.  Based on the RP Data – Rismark Hedonic Index, over the first ten months of the year Australia’s most expensive markets have increased in value by 11.9 percent – a higher rate of growth than the broader middle 60% of the market where values are up 10 percent and much higher than the most affordable areas where values have increased by 8.5 percent over the same time frame.

The improvement in equities markets and business conditions has prompted many top end buyers to venture back into the market.  For a while there were many bargains to be had – premium housing markets took the biggest value dive of any sector around the country in 2008 and now they are seeing  the biggest jump.  Values in the top end are now once again at record levels, having risen 2.4 percent higher than their previous peak recorded back in February 2008.  On an annual basis many of these premium suburbs have recorded some of the largest falls in median house prices however, it is clear with confidence returning many areas are set to bounce back or already doing so.

The other topic that comes to mind is that of waterfront homes and the issue of global warming.  The Copenhagen Diagnosis suggests global sea levels have risen by more than 5cm in the past 15 years.  Further to this, the report predicts the global sea-level rise may exceed 1 meter by 2100, with a rise of up to 2 meters considered an upper limit by this time.   Australia’s own Government recently released a report titled Managing our coastal zone in a changing climate’ which suggests that a one centimetre rise in sea levels could lead to at least one metre of erosion on the shoreline, making coastal properties vulnerable to flooding, erosion, high tides and surging storms.

The threat of rising water levels and more frequent and violent storms (not to mention the potential for higher insurance premiums and remediation costs) doesn’t seem to have impacted on buyer behavior just yet; and probably won’t for some time.  Human nature being what it is, it is likely that the desire for lifestyle and prestige will continue to outweigh any fears of climate change.

As the recent Perth sale demonstrates, in all likelihood the values of waterfront properties will continue to rise despite the heightened uncertainty that surround coastal markets and the affects of global warming.  Ultimately it is likely most owners and buyers will choose lifestyle and prestige over the more practical considerations that may or may not eventuate.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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