Wealthi property adviser Sam Assaad has slammed the quality and value of Sydney’s property market and advised buyers to instead look to Melbourne:
“It’s a market fuelled with greed and arrogance of big name developers, producing not even builder-range quality properties and selling it in the market knowing the housing demand in Sydney is still highly sought after,” Mr Assaad said.
By comparison, Melbourne’s more affordable prices and larger variety of successful developers had kept new home quality high in suburban areas.
“There’s always ego with developers, and I’m putting Melbourne on a bit of a pedestal, but Melbourne developers are willing to give a little bit more than they are in Sydney,” Mr Assaad said.
“They (Melbourne developers) need to maintain their reputation”…
“Sydney’s astute investors should resort to interstate investment instead of in their own backyard.”
While all cities are likely to experience growth this year, I believe that “astute investors” should instead look to the smaller main capitals (e.g. Perth, Brisbane and Adelaide) rather than Melbourne or Sydney.
First of all, Melbourne property is very expensive in a relative sense. The next chart plots Melbourne’s median house price against the weighted average of the other capital cities:
As you can see, Melbourne property is poor ‘value for money’, with relative affordability running near all-time lows.
Now compare Melbourne’s poor value for money against the smaller major capitals – namely Brisbane, Perth and Adelaide:
Each of these capitals offers far superior relative affordability, with their house prices tracking near 50-year lows against the other capitals (inflated heavily by Melbourne and Sydney).
Their superior affordability is also reflected by rental yields. Brisbane (4.3%), Perth (4.4%) and Adelaide (4.3%) offer far superior gross rental returns than Sydney (2.9%) and Melbourne (3.1%). Rents are also growing much faster in these smaller markets:
Finally, Melbourne’s housing market is also heavily reliant on mass immigration, which has collapsed. Accordingly, Melbourne is facing a massive oversupply of property in 2021 and 2022, which will dampen price and rental growth:
Sam Assaad might be right in advising investors to avoid investing in Sydney’s property market. But there are far better options than Melbourne, which offers poor value and is facing stiff headwinds from the collapse in immigration.
