Melbourne's price growth surpasses Sydney's

Melbourne’s property price growth has outpaced Sydney’s for the third consecutive quarter, according to new data from the Australian Bureau of Statistics (ABS).

Real estate prices in Melbourne rose 3% over the three months to June, while Sydney experienced an increase of 2.3%.

Both cities are now tied at 13.8% for annual price growth, followed by Hobart, where prices rose 12.4% in the year to June. 

“Sydney has lost a little bit of momentum. It does seem to have slowed down a lot,” said Shane Oliver, chief economist at AMP Capital. “Melbourne hasn’t slowed as much. I think that reflects the stronger population growth there.”

The Sydney and Melbourne housing markets are also moving in opposite directions, according to Andrew Wilson, chief economist at the Domain Group. “It’s a tale of two cities. Melbourne’s prices are still rising and Sydney’s are starting to decline,” he said.

Wilson noted that Sydney had been hardest hit by the decline in investor activity due to tightened lending measures, and he expects growth to be flat over the September quarter.

As for Melbourne, he expects prices in the inner city suburbs to begin tapering. “But not so much in the outer suburbs where there is still a lot of value,” he said.

Oliver said those hoping to see Melbourne’s real estate prices eventually match those of Sydney’s would be waiting for a long time, as property in the latter has 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,” he said.

While Oliver doesn’t see any signs of a property crash, he expects prices in Sydney to slow to a more modest growth. Sydney’s prices could decline 5% to 10% by mid-2018, as pockets of the Harbour City become congested with new apartment sales.

Oliver said Hobart’s price growth would continue, and annual growth would surpass Melbourne and Sydney’s in the next six months.

Across all capitals, growth was 1.9% for the quarter and 10.2% for the year to June.