Search any travel guide on Australia and chances are Sydney will be named as the best city to visit. What is there not to love about Sydney? It has two of the most iconic tourist attractions in the world in the Sydney Opera House and Sydney Harbor Bridge. The University of Sydney and the University of New South Wales are among the top 50 educational institutions in the world. Sydney is also widely regarded as the financial hub of the Pacific.
These conditions plus a thriving economy, friendly interest rates and a growing population have contributed to the consistent rise of Sydney’s real estate prices. Sydney is currently ranked 4th to 7th in most surveys on the most expensive real estate properties in the world. Yet interest in Sydney real estate continues to grow particularly from overseas markets like China, the US and Singapore.
But recent data suggests that property growth in Sydney has slowed down and Brisbane may be the new investment hotbed in Australia. The consensus among market analysts is that Sydney real estate prices have risen to a point that Sydneysiders can no longer afford to buy property.
According to Macquarie Research, when price housing differentials in Sydney and Melbourne have grown to nearly twice that of Brisbane (See Fig.1), it leads to shifts in demand that favour the capital of Queensland. This is because demand for properties in Sydney and Melbourne is no longer sustainable.
Fig 1 House price relativities – Price differentials between Sydney and Melbourne, relative to Brisbane, have reached stretched levels, which have historically been followed by multi-year reversions.
Currently, properties in Sydney and Melbourne can purchase 2.2 times and 1.5 times properties in Brisbane respectively.
The National Australia Bank (NAB) has echoed the same sentiment stating in its report that it expects property prices in Sydney to flatline in 2017. Meanwhile, Brisbane continues to post strong gains. Its housing prices have increased the past 14 quarters.
A study conducted by CoreLogic RP Data Pain and Gain showed that in 2016, more than 25% of Brisbane properties were sold for at least double their original purchase price.
What makes Brisbane the logical investment choice after Sydney?
- Property Prices are Still Affordable – Compared to Sydney and Melbourne, property prices in Brisbane which has been estimated at $632,000 are still affordable. An oversupply in available housing has created a dampening effect on property prices but this will soon be rectified by the next factor.
- Increasing Population – As property prices continue to rise in Sydney, it will increase the level of interstate migration flows to Brisbane. Market analysts expect a net migration inflow of 20,000 to 25,000 people to Brisbane which will create an increased demand for dwellings in the amount of 8,000 to 10,000 per year. This will balance out the oversupply of housing and push real estate prices upward.
- Improving Economy – BIS Shrapnel expects median house prices in Brisbane to increase by 7% come June 2019. It is one of Australia’s fastest growing economies and with a population that is estimated to hit 3 million in 2031, the demand for new housing could reach 156,000 by then.
Is Brisbane the new Sydney? Only time will tell if Brisbane will supplant Sydney as the preferred destination in Australia. Brisbane currently ranks 3rd behind Sydney and Melbourne in tourism.
Brisbane also has a number of fine educational institutions such as the University of Queensland, Griffith University and the Queensland University of Technology. Similar to Sydney, Brisbane is home to many world-renowned companies in the fields of IT and finance.
As an investment haven, it may be the best time to buy property in Brisbane as prices continue to be on the low side and the full effects of interstate migration on real estate have yet to be felt.
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