14 Jul Melb vs Syd Property prices in today’s AFR
Melbourne’s house price growth could overtake Sydney’s by 2016 according to national valuation practice Propell.
In its Residential Market Report for July, Propell forecasts that Sydney house prices will grow by 10 per cent over the next year, with Melbourne prices not far behind at 8 per cent.
But unlike most analysts, Propell argued that the situation could be reversed.
“We can imagine a scenario where Sydney price growth eases back into single digits while Melbourne growth rates are well into the teens,” wrote Propell.
Affordability underpins the contrarian view. Melbourne is “looking increasingly attractive” to investors priced out of Sydney (even though yields in Melbourne are still below those in Sydney.) And the view was given some currency when the Melbourne dwelling value jumped more than Sydney in June on CoreLogic RP Data numbers.
LIMITED APARTMENT GROWTH
The view also applies only to houses. The growth in apartment prices will be quite limited nationally in the coming year, according to Propell, with Sydney the best at 5 per cent, Newcastle next at 3 per cent, Brisbane at 2 per cent and Melbourne at just 1 per cent.
In Perth, where house and apartment prices are already sliding, house prices will fall 2 per cent in the next year and apartments will lose 7 per cent of value.
In Darwin, houses will barely hold their value and apartments will lose 3 per cent of value over the next year.
Propell notes that even though weekly rental levels are “ticking up”, investor demand is down due to to tougher rules for investors, including higher deposits and less rate discounting.
However, the firm argues foreign investment will be “undeterred” by proposed new rules from the Foreign Investment Review Board. In fact, in US dollar terms Sydney prices are still where they were a year ago.