Melbourne’s property price growth has outpaced Sydney’s for the third quarter in a row, data released on Tuesday shows.
Real estate prices in Melbourne rose 3 per cent over the three months to June, according to the latest Australian Bureau of Statistics data, while Sydney had an increase of 2.3 per cent.
The two cities are now tied for annual price growth at 13.8 per cent. They’re followed by Hobart, where prices rose 12.4 per cent in the year to June.
“Sydney has lost a little bit of momentum,” AMP Capital chief economist Shane Oliver said. “It does seemed to have slowed down a lot.
“Melbourne hasn’t slowed as much. I think that reflects the stronger population growth there.”
The Melbourne and Sydney markets were now moving at opposite ends, Domain Group chief economist Andrew Wilson said.
“It’s a tale of two cities. Melbourne’s prices are still rising and Sydney’s are starting to decline,” he said. “The Sydney market has run out of puff.”
Dr Wilson said Sydney, which had the highest level of investors, had been hardest hit by the decline in investor activity off the back of tightened lending measures.
He expected growth to be flat for the city over the September quarter.
While Melbourne was in catch up mode, prices in the inner city suburbs would also start to taper. “But not so much in the outer suburbs where there is still a lot of value,” he said.
Mr Oliver said those hoping to see Melbourne’s property prices catch up to Sydney would be waiting a long time, as property in the geographically constrained harbour city had always been at a higher premium.
“Sydney prices are about 40 per cent higher than Melbourne’s. To get that gap closed in the next 10 years, something horrible would have to happen there.”
Mr Oliver said, while he didn’t see signs of a property crash, he expected prices in Sydney to slow to more modest growth.
“It’s hard to see the [Sydney] market taking off again,” Mr Oliver added. “Sydney has become a victim of its own gains.”
It was possible Sydney prices could fall anywhere from 5 per cent to 10 per cent from mid-2018, as pockets of the city became congested with new apartment sales, he said.
Mr Oliver predicted Hobart’s price growth would continue, and annual growth would sit above Melbourne and Sydney’s in the next six months.
Across all the capital cities, growth was at 1.9 per cent for the quarter, and 10.2 per cent for the year to June.
Canberra, Adelaide and Brisbane had respective annual increases of 7.9, 3 and 5 per cent, while Perth and Darwin had price falls of 3.1 and 4.9 per cent.
An increasing number of Sydney buyers, particularly investors, were turning to other capital cities, according to PRD Nationwide’s national research manager Diaswati Mardiasmo.
“International and interstate investors are going to Melbourne, they’re going to Hobart, because they believe property prices in Sydney have peaked or have just become too unaffordable.
“It all comes back to affordability. We’re seeing more action from buyers in Melbourne,” she added, noting the city’s repeated ranking as the world’s most liveable city had boosted its international profile.
At its latest meeting, at which it left the cash rate unchanged at 1.5 per cent, the Reserve Bank of Australia board noted that, while there had been clear signs of easing conditions in the Sydney housing market, prices in Melbourne continued to grow strongly.
Sydney’s relatively low auction volumes and clearance rate, which had declined more than Melbourne’s rate, were also discussed, according to the meeting minutes, released on Tuesday.