And the winner is … Sydney!
The weekend clearance rate in Sydney was 10 percentage points higher than 12 months ago, and also 10 percentage points higher than the next highest — Melbourne.
The clearance rate in Perth was a miserable 20 per cent and in Brisbane it was not much more than 50 per cent. For all the talk of ridiculous Sydney prices pushing buyers to other states and regional cities, Sydney dominates.
Compared with Sydney and Melbourne, the other capital cities are regional towns: the past decade has seen no growth in house prices in any of them.
And house price growth in regional centres has been trending down for 10 years:
Ever since Gough Whitlam declared 44 years ago that Albury-Wodonga would have a population of 300,000, Australian governments have been wasting money trying to get people to shift to the country.
Each state government, especially Victoria and NSW, have constantly had decentralisation policies that have tried to move government departments to regional centres and paid companies to do likewise.
None of it has worked. Albury-Wodonga’s population is 100,000. Sydney and Melbourne dominate population growth and the only regional centres that have done well are those close enough to commute to Sydney and Melbourne.
If anything, decentralisation policies have distracted government planners from concentrating on the big cities and ensuring they are able to cope with growing populations.
Last week in an interview for The Constant Investor, the CEO of property developer Mirvac, Susan Lloyd-Hurwitz, explained how she had turned that company’s fortunes around by focusing on Melbourne and Sydney.
Over the past four years, Mirvac’s three main areas of business — office, retail and residential — have all been entirely focused on Australia’s two major cities.
Mirvac was created about the same time as Whitlam launched Australia’s decentralisation push and, until Lloyd-Hurwitz took over in 2012, had basically bought into it, dividing its focus between regional and urban investment.
Now it’s entirely an urban company and as Lloyd-Hurwitz says, “as a result the business is in substantially better shape, probably never been in better shape than it is right now”.
When I observed that Mirvac is not exactly a poster child for decentralisation, she said: “Well, I think that cities are just becoming denser … we need cities to make better use of land that we’ve got close into the city to stop the expense of having to provide infrastructure eighty miles out from the CBD.”
In fact, probably the only “decentralisation” policy Australian governments have ever needed was to make sure people living 80 miles (128km) from Sydney and Melbourne could get into the city by train in one hour.
But they have spectacularly failed to build rapid public transport for outer urban commuters, with the result that inner urban suburbs have become dense and expensive.
Meanwhile, the weekend clearance rate of 86.4 per cent in Sydney applies a bit of egg to the faces of the Reserve Bank directors who declared — while cutting the cash rate to 1.5 per cent on August 2 — that “the likelihood of lower interest rates exacerbating risks in the housing market has diminished”.
Right. But it all depends how you look at it. Look at regional Australia, including Hobart, Perth and Adelaide and there’s no problem. Even Melbourne’s clearance rate is down from a week ago.
It’s all about Sydney. Every other place in Australia has an oversupply of dwellings; Sydney can’t keep up with demand.
Is it a bubble, and therefore a risk?
Well there’s definitely no risk of a national housing bubble. Is there one in Sydney?
Perhaps: Sydney just happens to be where people want to live and invest and, at the moment, there’s a lack of supply.
Maybe there’ll be a crash if supply catches up and interest rates rise. Big ifs.
Alan Kohler is the publisher of The Constant Investor – www.theconstantinvestor.com
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The surge in Sydney’s auction clearance rate over the weekend to 86.4 per cent should finally lay two myths to rest. Firstly, that the housing market has stopped responding to lower interest rates and, secondly, that government decentralisation policies are worthwhile.