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Melbourne to Overtake Sydney As Nations Most Populous City in 2020

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    Melbourne is ready to overtake Sydney as the nation's most populous city during the 2020s for the first time since the gold rushes of the mid-19th century, increasing its political power, global status and economic strength over its traditional rival.

    Higher growth is being driven by rising birth rates, steady international migration and people moving from interstate and regional hubs, pushing Melbourne's and Sydney's populations to about 6 million by mid-2026.

    But Melbourne's population will pass Sydney's by the end of that year and the gap is expected to continue widening.

    Melbourne's population is expected to become home for 75 percent of Victorians. It is estimated to grow 28 percent faster than Sydney over the next six years, according to the latest estimates. The increasing population will also boost its national political power, global position and reach as a centre for corporates and significant cultural and sporting events.

    melbourne CBD centre from water

    The most significant population creates a gravitational pull that will begin to attract more global organizations, significant events and the head offices of national and regional institutions. New institutions will also be drawn by being located in the nation's largest city.

    Median property prices in Sydney and Melbourne are $776,000 and $619,000, respectively, according to CoreLogic, which monitors property prices.

    But Melbourne's property prices are also rising sharply, infrastructure is under pressure, particularly in the western suburbs.

    To support the population growth, the government is spending about $14 billion annually over the next four years on infrastructure, about triple what was spent in the ten years to 2014.

    As a result, Melbourne's housing market is set to eclipse Sydney's in 2020, fuelled by a stronger economy and higher population growth. However, the rapid pace is expected to lose steam as listings rise and affordability worsens. Considering the strong economy and demographic fundamentals, we could see the Melbourne housing market outperform Sydney's in 2020.

    Although rapid price growth evident during the past few months to be sustained, the high rate of population growth, low rate of unemployment and lower housing prices relative to Sydney should help support further gains in home values next year.

    After staying away from the market during 2019, investors are expected to return in droves, lured by the potential of more significant capital gains and cheaper financing.

    Investors are likely to be motivated by prospects for capital growth as well as the low cost of debt.

    While rental yields remain low, they are still higher than mortgage cost, providing abundant opportunities for positively geared properties as home loan rates move lower.

    Here are the top 3 reasons why Melbourne's property market is stronger than Sydney's

    Investing in Melbourne might be higher on many property buyers' agendas at the moment, as there are plenty of indicators that the city's real estate market is performing well. Some analysts believe this could be the year when the Victorian capital comes into its own, as the evidence points to better conditions than in Sydney.

    1. Steady price growth

    Many investors look for steady markets when they buy a property. Areas that experience boom-like conditions can be a cause for concern as the saying goes, what goes up must come down.

    The latest Residential Property Price Index (RPPI) from the Australian Bureau of Statistics (ABS) shows that conditions are just right in the Victorian capital. In September 2015, the RPPI showed a 2.9 percent quarterly rise in property prices. Year-on-year, the increase stood at 9.9 percent.

    This points to a sustainable market, especially when looked at in the context of the other ABS figures. Sydney's annual increase in prices registered at 19.9 percent, while Perth property prices declined 3.3 percent compared to a year earlier.

    1. Pulling away from the pack

    Results of the January CoreLogic RP Data Hedonic Home Value Index showed that Sydney is starting to slip behind its Victorian counterpart. Although its median dwelling price is significantly higher – $776,000 compared to $595,000, there's every reason for investors to get excited about buying in Melbourne's best suburbs.

    CoreLogic RP Data Head of Research Tim Lawless said: "The latest data reveals Sydney's housing market is now playing second fiddle to Melbourne's, at least in annual growth terms."

    1. Future growth expected to be strong

    This trend hasn't just been confined to late-2015 and early this year, as experts also expect further growth over the remainder of 2016. The CoreLogic-Moody's Analytics Australian Forecast Home Value Index predicts that Melbourne's property market will once again outperform Sydney.

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