Melbourne Overtakes Sydney

February 12th, 2016
Property price growth in Melbourne is the strongest in Australia for the first time in three years, with price growth in the Victorian capital overtaking Sydney on a monthly and yearly basis. While both markets are slowing down from the frenetic pace of the last few years, the Melbourne market has more room to move before it levels out. Brisbane and Adelaide posted modest annual growth, with the resource-focused cities of Perth and Darwin recording monthly and annual price declines.

According to the latest results from CoreLogic RP Data, Melbourne property prices grew 2.5 percent in January, compared to just 0.5 percent in Sydney. Strong January results gave Melbourne the extra push it needed to overtake Sydney, with year-on-year property price appreciation at 11 percent compared to 10.5 percent in Sydney. With prices in Sydney at their slowest annual pace in 29 months, the market may be starting to top out.

According to CoreLogic RP Data's research director Tim Lawless, "We've been seeing Sydney consistently drifting lower since about July last year, when values were rising at about 18 per cent per annum... Melbourne has also slowed down, but not quite as much ... we can see that in a whole bunch of other indicators as well, auction clearance rates for example in Melbourne were consistently higher than what Sydney was over the second half of the year."

While the Melbourne market has slowed in recent months, auction clearance rates and other indicators are still much higher than they are in Sydney. Melbourne maintained a 71.3 percent clearance rate on 151 auctions in the last week of January, with Sydney posting a much smaller clearance rate at 45.2 percent. While prices are likely to remain high in Sydney, sales volume reached its peak in late 2014 and annual price growth peaked a few months later in July 2015.

Despite weaker price growth, the median dwelling price in Sydney is still much higher than Melbourne, at $776,000 and $595,000 respectively. Prices in Canberra are third highest in the country at $587,500, followed by Darwin at $520,000, Perth at $515,000, Brisbane-Gold Coast at $480,000, Adelaide at $420,200, non-capital areas at $365,000, and Hobart at $332,500. The median house price in Sydney is $885,000, with $652,200 recorded in Melbourne. The NSW capital also recorded the highest median unit price in the country at $655,000, followed by Melbourne at $442,000.

With the Sydney market starting to stall, investors are looking towards other state capitals, including Canberra with price growth at 6 percent, Brisbane with 2.8 percent growth, and Hobart with 2.3 percent growth. According to Mr Lawless, "We are seeing some of those smaller cities - that have underperformed over the previous growth phase - now starting to show slightly better fundamentals, probably due to their affordability and also their higher [rental] yield profile," If Sydney’s annual property price growth continues along its current trajectory, single digit growth is likely in just a couple of months.

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