Why wealthy buyers are willing to overpay for prestige property

Affluent buyers usually safeguard their wealth by buying property carefully and prioritising high-value investments over emotional appeal. But sometimes, just sometimes, they will happily overpay for something they just can’t resist.

“That’s usually all about status, ego and competition,” says Andrew Cocks, the managing director of real estate giant Richardson & Wrench. “They might overpay for a special location, like on the harbour in Sydney, or on the river or by the beach in Melbourne, or for something that’s special architecturally.

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“Sometimes, it might be more about scarcity and position, when they’ll really want something and will pay more to secure it, or about privacy and security, which they need.

“I have also heard of a buyer paying too much just out of spite so someone else couldn’t have it.”

Another major attraction for high-net-worth individuals is a house or apartment that is completely renovated, with nothing left to do. Invariably time-poor, they’d far rather spend over the odds in cash for something they’d otherwise have to spend far too many hours overseeing themselves.

With today’s shortages of labour, ballooning construction costs and the liquidation of so many building firms – 3596 company collapses were recorded in the industry in the 2025 financial year alone – buying a property that needs a lot of work can prove a hideously pricey headache.

“It can be such a long, expensive road, and that really puts people off,” says Marshall White director John Bongiorno. “You need to engage an architect and then get all the approvals by battling against councils, and then it’s sometimes an unknown journey with your builder.

“You receive a quote, but 9.5 times out of 20, it costs more than they say, and is at least twice as difficult.”

Bongiorno’s agency recently sold a splendidly renovated two-level Edwardian home with Paul Bangay-designed gardens at 73 Merton St, Albert Park, for $10.15 million.

“As well as needing no work, it also had that wow-factor,” he says. “And there were a lot of people competing to buy it.”

Tightly held properties, which often only become available through a death or divorce, are also often fiercely fought over, which drives up the price to sometimes quite unexpected – and otherwise unjustified – levels.

“Then it’s ‘wantability’ over affordability, and people can get carried away,” Bongiorno says.

A buyer once told Rachelle Kroon, founder of Sphere Home Loans, that he wanted to buy in one particular small area of Canberra, from which he could walk to all his favourite restaurants. “When do houses come up there?” she asked him. “Never!” he replied.

“So certainly if a house does become available, there could be a lot of people interested, and prepared to pay over the odds,” Kroon says. “When emotions become involved, suddenly the money doesn’t matter quite so much anymore, and if you’re affluent, you have more room to manoeuvre.”

It may not always be such an unwise decision either. There have been many cases of people paying a lot more for something that turns out to have hidden potential.

“The price today might be high, but it could prove to be incredibly good value in the future,” Kroon says.