‘That *insert inner-city gentrifying suburb name here* is like Redfern five years ago.’ It’s a comment I frequently make to describe the transformation currently occurring in Melbourne’s inner north and west. Analysis we conducted this week, however, indicates a more widespread application of the analogy.
Melbourne may be the most liveable city in the world, but its house prices are five years behind Sydney’s.
Median House Price
(figures quoted at December of each year)
Source: ABS 6416.0 – Residential Property Price Indexes – Eight Capital Cities, Dec 2016
*Percentage difference between Sydney and Melbourne values is absolute.
At December 2007, the median price of a house in Melbourne was $410,000. That figure is 8% less than Sydney’s median price five years prior ($444,000 in December 2002). At December 2015, Melbourne’s median house price differed from Sydney’s five years prior by only 2%. The difference between the Sydney ’03 and Melbourne ’08 figure is artificially elevated on account of the ’08 financial crisis and its depressing impact on Melbourne prices. Vice versa for the Sydney ’08 and Melbourne ’13 figures.
The price difference between Sydney and Melbourne when we adjust for the harbour city’s head start is marginally over 10% – well below the actual 40% premium.
In a previous post, I wrote about how the price gap between Sydney and Melbourne had trended downward for the past two decades. What we’ll likely see moving forward is a reduction of Sydney’s ‘head start’ as the price gap constricts on the back of Melbourne’s strong economic and population growth numbers.
Watch out Sydney, Melbourne is closing in.