The great divide

Ten years ago the difference between the cost of housing in Sydney and Perth was only $5,000. Today you wouldn’t find two more different markets in Australia.

While Sydney has experienced a 118% increase in its median house price over the last decade, Perth’s median house price growth was just 3.8% over the same period. This was also well below the growth in all other states and territories (the next lowest growth was Brisbane with 37.3%).

So what caused such a great divergence when the two markets started at a similar price level a decade ago?

Essentially it boils down to the very different economic drivers between the two cities – some would say the two cities are as different as chalk and cheese in this regard.

Perth was heavily reliant on the mining sector while Sydney has a more diversified economy. So Sydney was not as exposed to the changes in commodity prices as Perth was. However as a typically more indebted city, Sydney was “more sensitive” to interest rates.

Ironically, Sydneysiders can largely thank Perth for the low interest rates that ignited the east coast property boom (because mining was largely propping up the Australian economy the RBA reacted by slashing interest rates when the sector went bust in WA).

Today Sydney’s booming house prices are starting to moderate, while the Perth property market has started to show signs of stabilising as indicated in the June quarter results.

Real Estate Institute of WA (REIWA) President Hayden Groves said, “We’re certainly not experiencing the steep declines across the board we once were. Although no one can accurately ascertain the future of the property market, the signs are there that we have finally found, or are very close to finding, the ‘floor’ of the market.”

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Post by ShelMarkblog 03 Aug 2017 0