Sydney is no longer the best Australian city to invest in. That’s according to new property reports that have been released today. Let’s bring in Veronica Morgan from the Property Investment Professionals of Australia.

Hello to you, Veronica.

Hi, Sally.

Can we just start off? What has caused this change, this shift away from Sydney to Melbourne?

Well, obviously, being the most expensive city, you’ve got people with the highest mortgages here, and people are being impacted by the cost of living, but also compliance costs and generally wanting to ease their financial burden. So that’s one of the key reasons why the actual sale of investment properties in Sydney has seen the highest increase over the past year.

If it’s not Sydney, which cities are investors now looking at? What’s the top of the list?

Interestingly enough, Melbourne is now at the top of the list. A lot of people are seeing that Melbourne’s median dwelling price has dipped below Brisbane and Adelaide, and they’re seeing value there. Opportunistic buyers are looking at that market. But second to Melbourne is Perth, with 26% of respondents considering Melbourne and 25% considering Perth. This positivity across the board continues, especially in Perth, where recent price rises are attracting attention from investors wanting to get in on the action.

The data also shows that 1 in 7 investors have sold in the last year. What are the causes behind this? Is it just higher interest rates? What’s the broader impact on the market from this?

Interestingly enough, despite the pun, interest rates are not the major reason people are selling. The number one reason is the increase in holding costs and compliance costs, partly due to government interventions and taxes, such as land taxes in Victoria. Another factor is that many people want to reduce their overall debt, which isn’t directly related to interest rates. Although the fourth reason is indeed rising interest rates, the dominant factors are more tied to financial and regulatory pressures.

With so many properties being sold, only 35% of investment properties are being sold to other investors. That means first home buyers, upgraders, and downsizers are taking this stock, which has a detrimental impact on the rental pool. In Sydney, for example, the vacancy rate has been sitting around 1.6% for the last couple of years. Before Covid, it was up at 3.9%, showing that supply just isn’t coming into the market.

Yep. Renters are certainly feeling it. All right, Veronica, thanks for your insights this afternoon. We appreciate it.

Thanks.

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