The traditional rivalry between Sydney and Melbourne isn’t just about footy teams, culture or food — property is also a major point of difference.
Sydney property prices typically run higher than Melbourne and it’s been that way for many many decades — perhaps always. However, this is not necessarily a negative or a positive for either city.
Higher prices could mean greater capital gains when it comes time to sell or it could mean over-priced property. Cheaper property is usually an indication of lower demand, which could mean lower capital gains in the future, or it could mean a bargain.
Population growth and household wealth has the biggest impact on property prices and ongoing demand but sometimes these traditional factors can get out of whack and that’s when a market opportunity can quickly arise.
About once every ten years, the traditional price gap between Sydney and Melbourne gets squeezed and prices move closer together.
We recognised this was the case in Sydney during the past few years and we quickly took advantage of it by increasing our purchasing activity.
Now, however, the price gap is widening again, with Sydney prices moving back to the usual premium above Melbourne prices.
This can be seen in the way Sydney prices are rocketing ahead, with price growth of up to 14 per cent during the past few months in some locations. This rapid price growth has led some commentators to mistakenly warn of a price bubble in Sydney. In my view, this is not a price bubble but Sydney’s natural adjustment back up to its price premium.
And for those investors interested in the Sydney market, there is still more growth to come before the price gap, in these two cities, get back to their traditional status quo.
UNTIL NEXT WEEK