February 9, 2019
Two Cities, One Dilemma

Sydney takes the cake when it comes to the most expensive residential real estate to purchase in Australia where the average housing price sits at $1.1 million dollars. Melbourne, being the second most expensive, averages $847,000 per house. Which leads to the question, why is it so much more expensive to purchase real estate in Sydney than it is in Australia, and does it justify a $300,000 difference?

Supply and demand plays a huge part in the cost of real estate between Sydney and Melbourne. With constraints in geography, Sydney is running out of places to build, but it still holds less population per square km than Melbourne does. Melbourne has a population density of 453 people per square kilometer, while Sydney has 400. Compared to other well-known cities around the world, both Sydney and Melbourne still have very small population density which attracts buyers and investors overseas.

It’s apparent that high real estate prices can really mean the opposite of success and may represent a failure to deliver the housing its residents need. A recently published article on the housing situation in Sydney, listed a few more interesting statistics. “According to Demographia’s annual index, Sydney is the most unaffordable housing market, and Melbourne listed 6th. Its mentioned that this is due to the Urban containment policies which aim to curb the growth of urban sprawl by encouraging greater density in existing housing areas. ‘This is associated with higher land prices, and in consequence, higher house prices,’ the report stated.” With that, Melbourne has done a better job keeping up with the supply portion of this delicate balance by allowing more urban sprawling. Housing approvals in Melbourne are currently running at 50,000 new homes a year, while in 2017, Sydney saw approximately 39,000 homes built. Both cities are years into a housing boom, but Sydney simply hasn’t offered enough of a surplus in housing and as a result real estate prices have exceeded its sister city.

Outside of crushing numbers and examining housing bubbles, one could also say that the weather, sunny beaches, and landmarks play a part in this real estate variance of $300,000. Warm and sunny days occur more often in Sydney than they do in Melbourne as Sydney is 3 degrees higher in average annual Celsius temperatures than Melbourne is. While this may not seem like a vast difference, those who like to get and stay warm may gravitate toward Sydney. People don’t just flock to Sydney to feel the warmth of the sun though, they go to enjoy iconic scenery at some of the best beaches in the country. If you’re in Sydney, Bondi beach is a mere 7km from CBD, whereas in Melbourne you must travel double that (15km) to feel the oceans waves at Brighton Beach.

Sydney may just beat out Melbourne in terms of nature as well. Nature enthusiasts call Sydney home as there is an endless amount of opportunity for them to get outside. Sydney is home to breathtaking mountains, botanical gardens, and national parks that provide sprawling greenery. Melbourne on the other hand doesn’t have much to offer apart from a few sub-par beaches and the Yarra river that lazily trickles through the city. When compared to Sydney, Melbourne is a negative for those who seek nature or enjoy coastal living.

So do any of the things listed above justify a $300,000 difference? You might just have to holiday to both to determine for yourself which one is worth settling down in or should we say, “down under”.

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