Volatility in sales prices in Sydney and Melbourne and greater stability in other State Capitals.

Rental stability across the country except for Perth.

What does this mean for employers relocating staff interstate to Sydney and Melbourne?

In our August Client Alert we commented that Sydney and Melbourne rents have shown stability in recent years  despite significant price increases. In other State Capitals sales price increases have been much lower as the table below illustrates.

Changes in the 5 years 2012 – 2017

 Sales Price IncreasesRental Increases
Sydney82%17%
Melbourne54%15%
Brisbane20%6%
Perth7%-20%
Adelaide17%6%

Rent increases have been much lower than sales price increases in all State Capitals. In Perth the impact of the end of the “resources boom” can be seen in the lower rents (on average) in 2017 than they were five years earlier.

The Cost of Buying

For those considering relocation from other states into Sydney and Melbourne, buying residential property has become even harder as the table below demonstrates. For example, someone living in Adelaide considering a move to Melbourne has to expect to pay over 1.8 times the value of their Adelaide home for an equivalent property, and a lot more for Sydney (2.65 times)

Cost of Housing Indices (June Quarter 2017)

 To SydneyTo Melbourne
From Sydney1.000.69
From Melbourne1.451.00
From Brisbane2.321.6
From Adelaide2.651.82
From Perth2.361.63

Over the years the proportion of employers providing financial assistance for those moving to a higher costs location has declined and it is now uncommon. So how do employers encourage potential transferees to move?

The answer is not clear and it is likely many employers have experienced employee reluctance to relocate from the lower cost locations such as Brisbane, Adelaide and Perth.

Long Term Renting?

The higher cost profile of Melbourne and Sydney is less dramatic in rental housing as the following table shows. For someone moving from Adelaide to Melbourne, the data shows they can expect to pay just 12% more for rental housing, compared with 80% more if they purchase.

Cost of Rental Housing Indices (June Quarter 2017)

 To SydneyTo Melbourne
From Sydney1.000.78
From Melbourne1.281.00
From Brisbane1.281.00
From Adelaide1.431.12
From Perth1.351.06

This perhaps provides a financial incentive for employees to consider keeping their property in the lower cost location and renting when they relocate. In the past, this was something that many employers discouraged: if the move was a permanent appointment to a Head Office location, it could work against the employee and family fully embracing the new location.

Data sources: Real Estate Institute of Australia; www.realestate.com.au