Sydney property investors struggling to afford Sydney prices have been snapping up Melbourne real estate instead because it’s cheaper, according to developers.
The lower prices in Melbourne have started to attract Sydney investors who are often prepared to buy property in the southern State without even seeing it first.
According to Domain.com the trend has picked up enough momentum for Melbourne developers to start targeting internet marketing directly at Sydney IP addresses. Marketers would use the same tactic to lure buyers from places like China and Singapore.
Marshall White project director Leonard Teplin told Domain.com that Sydneysiders were increasingly keen on the Melbourne property investment market and were buying without even making the trip down south the look at the property first.
“With Sydney prices going through the roof, Melbourne is seen as relatively cheap,” he said.
A property investor is looking at a $212,000 dollar difference in the median price of a unit in Melbourne compared to Sydney, with Sydney unit prices rising by 13.9 per cent last quarter to $656,076.
This compares to Melbourne’s more modest growth of 4.5 per cent to $443,549.
The Real Estate Institute of Victoria say they are seeing a surge in investors looking for property in Melbourne’s inner ring, including from interstate buyers.
Mr Teplin said a person from Sydney could be looking for an unrenovated unit in Bondi and would need $1.2 million to get one, whereas they could invest in a new three-bedroom apartment in South Yarra and still have change left over from that.
“There is a huge price disparity… When they’re looking at one bedroom apartments, it’s almost unfathomable in Melbourne that you would pay $750,000,” he said.
Domain senior economist Andrew Wilson said Melbourne rental yields were slightly higher than Sydney but he thinks it’s the affordability and increased supply that is driving demand for investors to head interstate.
“Investors would be looking from the point of view of a more affordable entry point and slightly better yields, but the outlook for capital growth is better in Sydney,” he told Domain.com.
Houses aren’t being left alone by Sydney investors either. YourLand Developments director Mark Erskine said he has had a healthy interest from Sydney investors looking to buy in the River Valley development in Sunshine North which is just nine kilometres from Melbourne’s CBD.
Interestingly, Mr Erskine said he was even seeing the first early signs that investors from Sydney were looking to possibly relocate to Melbourne, not just invest.
“They’re saying, ‘look at what we can have here if we have a family and want a home’,” he told Domain.com.
Mr Erskine says one in every eleven enquiries he gets for the River Valley development now come from Sydney.
According to Mr Wilson, the strong investor activity would only continue, making it tough for non-investors and first-home buyers despite investor lending restrictions that have recently been put in place.
“The big picture is that we can expect more not less investor activity, we won’t see a shakeout of investors as we’ve had previously – this is a whole new ball game,” he said.