Homeowners in New South Wales and Victoria are either checking out for a new home or planning to invest in other states, with South Australia and Western Australia as their top choices.
Data from PropTrack showed that the number of buyers in NSW looking for properties in their home state has been going down from 84% in 2020, 81% in 2021, to 77% in the year-to-date.
There was a 91% increase in the number of NSW property hunters who are looking for a new home or investment in South Australia.
Western Australia, Queensland, and Northern Territory also saw more interested buyers from NSW.
The trend was similar among buyers located in Victoria. However, it appears Victorian buyers are more interested in properties in Western Australia, which saw a 42% increase in interest.
What drives the heightened interest in interstate buying
The relatively high dwelling prices in Sydney and Melbourne are on top of the reasons why buyers from NSW and Victoria are looking elsewhere to find their new home or investment property.
The median price of units, for instance, was at $785,000 in Greater Sydney and $621,000 in Greater Melbourne, significantly higher than in other state capitals.
PropTrack economist Anne Flaherty said property owners in the two states have benefited from the two years of low interest-rate environment.
“For those that already owned property, this has led to significant equity gains – particularly in our two most expensive cities – which can fund further investments,” she said.
Investors looking for stronger yields
Ms Flaherty said strong rental yields are also a key driver, particularly for investors based in NSW and Victoria.
“Over the past two years, the price of property has appreciated far more quickly than rents and this has driven yields lower,” she said.
Typically, units are the most sought-after type of property, given that they generally produce higher yields.
Gross yields for units in Sydney and Melbourne average 3.5% and 3.8%, respectively — these rates are below the average yields recorded for houses in every other Australian capital city.
“For many investors, the search for stronger yields has become more critical,” Ms Flaherty said.
However, the rising interest rates remain a challenge for these investors, especially with the surge in inflation.
“For buyers from Sydney and Melbourne, interstate markets present an opportunity to purchase a house and land for less than the cost of a unit in their home market — and those types of investments are far more likely to produce a higher yield,” Ms Flaherty said.
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Photo by @hansonluu on Unsplash.
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