Australia’s prestige property market is showing signs of recovery as cashed up buyers swoop on discounted properties in our most desirable suburbs.

Premium property took a hit last year as the full force of the GFC significantly impacted highly geared professionals, particularly those in the banking and finance sectors. Large job losses and declining wealth in super and investment portfolios led to many prestige property owners putting their homes on the market to regain some liquidity.

This created an oversupply at a time when buyer confidence was very low. When supply outstrips demand, property prices will inevitably soften and this has led to some truly outstanding homes being sold for prices well below their intrinsic worth in recent times.

It’s not often that you’ll see the words ‘bargain’ and ‘prestige property’ in the same sentence but unfortunately that’s what a global financial crisis can do.

In 2008, property values in the top 20 per cent of our richest suburbs declined by an average of 10.3 per cent, according to RP Data. We saw larger discounting* though in suburbs such as Applecross (-19.7 per cent), Swanbourne (-18.4 per cent) and Dampier (-18.3 per cent) in Western Australia; Surfers Paradise (-18.0 per cent), St Lucia (-15.6 per cent) and New Farm (-15.5 per cent) in Queensland; Clontarf (-14.8 per cent), Byron Bay (-15.2 per cent) and Macmasters Beach (-15.1 per cent) in NSW and Hampton (-14.5 per cent) and Brighton (-15 per cent) in Victoria.

All these suburbs are adjacent to the water and they’re also the areas where an above average level of stock was offered over the past year.

On the bright side, this sort of discounting is fantastic news for upgraders as beachfront and waterfront ‘dream homes’ are suddenly within reach. Interest rates are at a record low and many people have now reconsolidated their debts and investments as they adjust to living in a new financial climate.

We started seeing more buyers at open inspections for premium houses around May and sale prices have increased due to this strengthening demand and reduced supply.

New figures from RP Data show a 5.7 per cent increase in prices in the top 20 per cent of the market in the first half of the year – well above the national average of 4.5 per cent.

Although the GFC is not over, it’s becoming clear that Australia is likely to ride out this storm a little more easily than originally anticipated. This has enhanced confidence across the board not only in property but also in shares with a 30 per cent stock market rally since March. While unemployment will unfortunately continue to rise, the peak is now estimated to go below eight per cent and we’re likely to avoid a technical recession.

All this is making property buyers feel pretty good and the extraordinary value available at the top end is proving too attractive to pass up. There’s still time to secure a good buy as upper end prices are still 8.1 per cent off their March 2008 peak. That means a $3 million property is now selling at about a $250,000 less than it would have in March last year. If your job is secure, I’d say it’s time to go shopping.

*Top 20 per cent of Australia’s most expensive suburbs where 10 or more sales have occurred over the past 12 months. The discount represents the average difference between the original asking price and the ultimate selling price of all houses sold during this period. Figures supplied by RP Data.