Sydney property buyers seek solace in Melbourne

There's been much comment about the nature of the property market both in Melbourne and nationally of late. It could be reasonably argued that the sector is subject to certain trends like any other; the dominance of Asian-based buyers in Melbourne's property market in recent years is a prime example.

So what is the current direction of the property market and in particular Melbourne apartment market? It's been well publicised that discerning buyers have swung to more bespoke or intimate projects, shying away from larger inner city investor-driven stock.

But what of the influence of the growing band of buyers emanating from Sydney and whay have they risen to prominence here in Melbourne?

Urban Melbourne posed a series of questions to three prominent players in the Melbourne apartment market, with the following answers provided:

Future Estate Founder & Managing Director, Ben Anderson

How strong is the interest from Sydney and has there been a discernible increase in interest over the last year?

We have definitely witnessed a large increase in the number of Sydney-based purchasers buying into our projects; particularly over the last few years. The feedback we have received is that, given the affordability constraints of the Sydney market, investors are being forced to look elsewhere, with Melbourne and Brisbane logical alternatives.

Melbourne, being the next biggest city in Australia, boasts a significantly larger, much more diverse economy with a broader range of employment opportunities than Brisbane, so naturally it is the most popular choice. Investors can appreciate and understand the inherent benefits of a city of this size and scale.

What is the conversion rate of interested Sydneysiders to sales contracts?

Very few reservations we receive from our Sydney clients drop away; they are currently the most active purchasers across our projects.

Are Sydneysiders buying in Melbourne skewed toward owner occupiers or investors, and if the latter what apartment size and layout are they requesting?

Over the last 12 months, we have noticed that Sydneysiders buying in Melbourne have predominately been doing so for investment purposes, however, this is an ever evolving trend.

Recognised as the world’s most liveable city for the fifth year in a row, it is no wonder that more and more people are migrating from NSW to Melbourne. Something to consider on this note is, with each property cycle, affordability plays an important role, especially when it comes to interstate migration.

People will naturally move away from an unaffordable location and seek out residence in a cheaper area, that we know, the obvious limiting factor here is employment opportunity. Thus, when comparing the size, strength and diversity of the Melbourne economy with Sydney, a city with similar income potential, property price becomes the prime motivation.

Melbourne housing is far more affordable, it is as simple as that, which is why Future Estate are focusing our attention on this market.

Typically we like to see 30%-35% (max) of a household’s income going to mortgage repayments. The rationale behind this is that house price growth can only continue long-term if people can afford to buy. If, however, affordability is too constrained, as is the case in many parts of Sydney where 50% of a household’s income goes to mortgage repayments, then the prospects of sustainable capital growth are far lower and the risk of a price correction, far higher.

Hence Melbourne’s reputation as a smarter investment opportunity and Sydney’s a high-risk, low-reward market.

Cameron Clarke, Founder & Principal of My Real Estate Mate

Why are Sydney investors drawn to Melbourne?

The feeling of 'value' in Melbourne is more discernible. Sydney entry prices are high for prospective buyers and investors, and there is strong competition from Asian-based and backed buyers across all sectors of property.

Having missed out or feeling that they will, Melbourne is the next logical step in their quest to purchase property.

Define the typical buyer from Sydney.

Couples are saying lets move to Melbourne feeling that Sydney is at its peak, with entrepreneurial types and sole investors also present. They're attracted to stamp duty savings and depreciation over buying established property in Sydney.

There is also a degree of an 'I own an investment property interstate' mentality, with accounts for many of the client referrals we receive.

What's the typical property Sydneysiders have in mind when purchasing in Melbourne?

Enquiries from Sydney-based prospective clients have doubled since January 2016, with the trend really cementing itself during June 2015. Product-wise a single bedroom apartment in Sydney is roughly the same as a two bedroom, 2 bathroom in Melbourne so this is preferred product, with or without a car park. Melbourne's public transport system is well regarded and understood by those who are seeking properties without the intention of owning a vehicle..

Budgets for prospective Sydney buyers range from $400,000-$600,000; clients are happy looking at marketing and plans over email and will generally come to Melbourne once they have genuine intent on a particular property...bottom line is that with $600,000 a Sydney resident will achieve far more in Melbourne than the Harbour City.

Bradley Dean, Director of off the plan sales and marketing company Eton Property Group

How strong is the interest from Sydney and has there been a discernible increase in interest over the last year?

We have seen a huge increase in the interest in Melbourne properties from Sydney buyers in the last 12 months.

With the Sydney market reaching record heights, buyers are now looking to Melbourne for the cheaper alternative. Buyers are quick to move, understanding that if they want the best choice of apartments they need to act quickly, as has been the case with one of our projects in North Melbourne, Reflections, where demand from Sydney investors has been particularly strong.

What is the conversion rate of interested Sydneysiders to sales contracts where possible?

We have found, given the quality of the projects we are currently marketing, 20-30% of Sydney registrations are converting into sales, most of whom are buying, sight unseen.

What we are also noticing is a shift in the locations they are favouring, with many Sydneysiders shifting their focus from CBD & Southbank projects to inner fringe areas of Melbourne. This can be put down to the growing realisation that Melbourne’s CBD and Southbank are becoming over-developed and locals would in fact prefer to live on the outskirts of the inner city, where they have access to superior public transport links, schools, cafés, eateries, amenities and leisure facilities.

Beyond location, these buyers are becoming savvier and know to seek out those projects offering luxury inclusions, better quality fixtures and fittings, and limited communal facilities, to ensure body corporate costs are kept at a minimum.

Are Sydneysiders buying in Melbourne skewed toward owner occupiers or investors, and if the latter what apartment size and layout are they requesting?

The Sydneysiders we are dealing with are mostly investors.

Melbourne is such a competitive market, here you can pick up a one-bedroom apartment for under $450,000 and a two-bedroom apartment for under $650,000. For those interstate investors, it is almost like bargain buying; for the price of one, one-bedroom apartment they can double down in Melbourne and buy two.

Interestingly, however, we have had a couple of instances where young couples are relocating their lives and migrating south to start a fresh in Melbourne where it is so much more affordable.

Lead image: Tommy Miller

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