Mass property exodus is underway in Sydney as prices hike

Housing price growth in Sydney remains stronger than any where else in the country due to the welcoming accompanying spurt in jobs along with improved economic conditions.

But the substantial cost of housing in Sydney makes it a less desirable location for people to live here.

The price boom of 2012-2016 will result in many young families considering alternatives to Sydney, especially when it comes time to upgrade to a bigger house.

Also read: Aussies in these states take the longest to save a first home deposit

Overseas migration typically attracts the headlines as the key factor in population growth and price growth, but what is often overlooked is the impact of interstate migration on the demographic composition of the states and territories.

Yes net overseas migration added 180,000 people to the Australian population, but some 350,000 people moved between states and territories in 2015.

Victoria recorded the highest overall population growth rate of all states and territories at 1.9 percent, adding an extra 114,900 people to the population with net overseas migration the main contributor to growth in Victoria, adding 62,800 people to the population over the year. The remainder of Victoria's population change was explained by natural increase (+37,600) and net interstate migration (+14,500).

NSW's was 1.4 per cent, adding 103,000 over the year ending March 2016, but NSW had 90,000 interstate arrivals over the year and around 100,000 who left.

The exodus is underway.

Also read: Could we really have double digit property growth again next year?

The change in interstate migration over recent years has increasingly seen a shift from Queensland as the destination to Victoria due to its substantially more affordable housing costs and job prospects.

The recent change has been driven by the working age population, in particular between 20-29 years old. It follows that this mobile demographic will eventually buy their first home in Melbourne rather than Sydney.

The latest CoreLogic data showed annual growth in Sydney home prices remains just shy of 11 percent and growth remains close to 10 percent in Melbourne.

But there are big difference in prices.

Sydney's $920,000 to Melbourne's $665,000 for houses.

Sydney's $690,000 to Melbourne's $495,000 for apartments.

Sydney units have regularly been more expensive than Melbourne houses and Sydney median unit prices have consistently been higher than Melbourne median house prices since early 2012.

Also read: Which Aussie city offers the cheapest rent?

It was telling that the latest CoreLogic release confirmed Sydney's price growth was strong across both houses and apartments.

Detached Sydney house prices were up 10.9 percent compared with units at 9.1 percent highlighting the lively supply/demand dynamic that exists across the Sydney region.

In Melbourne however there is a substantial difference in growth rates between houses and units, with house values up 9.6 percent compared with a 5.2 percent increase in unit values over the past year.

Brisbane’s housing market has shown a even larger spread, with house values up 4.7 percent compared with units which have had a 1.4 percent fall in unit values over the year.

Cameron Kusher at CoreLogic believes outside of Sydney and Melbourne, cheaper housing alone was proving not enough to attract people to these cities as they lacked a strong economy with decent employment prospects.

Also read: Building vs buying a new home: top tips you need to know

So the young families aren't leaving the city in favour of seachange and treechange lifestyle locations.

Indeed Melbourne had the largest overall population growth of all Greater Capital Cities up by 91,600 people, or 2.1 percent to $4.5 million, followed by Sydney up 83,300 to 4.9 million in 2014-15.

Greater Sydney's population grew by 1.7 percent in 2014-15, which accounted for 80 percent of the total NSW growth, with Waterloo, in inner Sydney, having the largest increase, up by 3,100 people.