The future property hotspots
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| Summary: With property values climbing in Sydney and Perth, coupled with competition for stock intensifying in these cities and Melbourne, buyers may start to look at more affordable alternatives and focus their attention on markets such as Brisbane and Adelaide. |
| Key take-out: The housing price gap between Sydney, Perth and Melbourne and other capitals has widened significantly based on July median price data. |
| Key beneficiaries: General investors. Category: Residential property. |
While median prices are not a preferred measure for capital growth or losses, the method is a good way to assess other aspects of the housing market such as affordability and what price points homes are currently selling for.
Around the cities, Sydney is currently, and has maintained its position as the city to hold the highest median selling prices for homes.
Based on July 2013 data, in Sydney the combined house and unit median price was $570,000, which is 16% higher than the median selling price in Melbourne ($492,000), 33% higher than Brisbane ($429,000), 49% higher than Adelaide ($382,000), 15% higher than Perth ($494,600), 87% higher than Hobart ($305,000), 16% higher than Darwin ($490,000) and 14% higher than Canberra ($500,000).
My analysis for Sydney shows that in relation to other capital cities such as Melbourne, the price differential has recently started to narrow. While there was little change over the past year compared to Perth, the gap in pricing between Brisbane and Adelaide has become more significant.
Between Sydney and Brisbane the price gap is currently at its greatest level since June 2006, while for Adelaide it is at its widest since the middle of 2007.
The chart below shows that over time, the differential in pricing between Sydney and the other major capital cities has compressed. I believe that the gap is unlikely to revert to these previous highs.
Starting with Melbourne, Sydney’s median price is 15.9% higher than across the city of Melbourne and Perth’s median price is 0.5% higher. The gap in pricing between Melbourne and Sydney is at its narrowest level since February 2012 and for Perth, the gap is at its lowest level since January 2012. Brisbane’s median price is 12.8% lower than that of Melbourne which is the widest gap since August 2003. Adelaide’s median price is -22.4% lower, the largest gap since December 2010.
Compared with Brisbane, home prices are higher in Sydney (32.9%), Melbourne (14.9%) and Perth (15.3%). The gap in pricing relative to Perth is 15.3% and has been relatively stable over the past year. Adelaide’s median price is -11.0% lower than those in Brisbane and the gap has been quite stable since early 2012.
The last time Adelaide home prices were higher than in any other major capital city was in November 2004 when the median house price was - 0.4% lower.
There is a significant price gap between Adelaide and Sydney, Melbourne and Brisbane prices. Perth’s median price is 29.5% higher than that in Adelaide and the gap has decreased over recent months.
Based on these results, there is a significant gap in pricing between Sydney and other capital cities. Melbourne and Perth prices are relatively similar, with a large step down in median price to Brisbane and then a further large gap to Adelaide prices.
With home values rising at a faster pace in Sydney, Melbourne and Perth than in Brisbane and Adelaide, I expect that gaps in selling prices will increase over the coming months, which may then see a shift in focus to the more affordable markets of Brisbane and Adelaide.
Note: The median house prices across the capital cities are calculated based over a rolling three month period of sales.
Cameron Kusher is a researcher at RP Data.
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