How far would you go?

Posted by Dominic Cavagnino

One of the primary reasons for the slow-down in Sydney’s property market is the strain on affordability. It seems to have become a perpetual debate, re-occurring at the peak of every cycle. The concerns around affordability are in full voice and then fade away through periods of correction and stagnation.

There’s no doubt that housing affordability in Sydney is an issue and will restrict growth for the medium term. As discussed in a previous research insight, history suggests that Sydney’s stagnation generally lasts eight years.

A study conducted by Corelogic looked into how close to each capital city you could find suburbs where the median house and apartment values were under $500,000. This study highlights the relative value proposition in both Brisbane and Melbourne reinforcing the opportunity in both cities.

Median house price relative to distance from the CBD

On average in Sydney you’d have to travel 57 kilometres from the city to find homes under $500,000. In Melbourne and Brisbane, the average distance from the CBD is 23.4 and 10.6 kilometres respectively.

Median unit price relative to distance from the CBD

On average in Sydney you’d need to travel between 12 and 17 kilometres west of the city to find apartments under $500,000. Evidently, in both Melbourne and Brisbane you can find apartments within the CBD and in the surrounding suburbs for under $500,000.

For people with the ability to re-locate the question of ‘where would I prefer to live?’ can be asked. As an example let’s base a person’s lifestyle on distance to employment, entertainment and amenity. The lifestyle on offer in Carlton, Flemington, Travancore in Melbourne and South Brisbane, Kangaroo Point and Fortitude Valley in Brisbane would be considered far superior to that of Wiley Park, Punchbowl, Guilford and Lakemba. The relative value of these suburbs highlights the opportunity and potential for growth in Melbourne and Brisbane.

The disparity between median values on Australia’s eastern seaboard is a key indicator for where affordability-driven demand will go. ABS data suggests that as at December 2017 Sydney’s median house price was 30% higher than Melbourne’s and 84% higher than Brisbane’s. History suggests that as the disparity between Sydney and Brisbane peaks, affordability drives a shift in property demand. An increase in interstate migration to the sunshine state capital is already occurring and an improvement to the property market is likely to reduce the gap between the two cities.

Posted by Dominic Cavagnino, on 5th Jun 2018