How Sydney's lack of housing supply makes it so much more expensive to live in than Melbourne – ABC News

How Sydney's lack of housing supply makes it so much more expensive to live in than Melbourne
Tasked with finding a new place to live, Sydney woman Alexandra Koster weighed up her renting options, and made the move down to Melbourne.
"I was thinking realistically about renting in Sydney, and outside of some very specific places further out … I probably couldn't afford [what I wanted]," she said.
The 31-year-old is now settled in a spacious inner-city North Fitzroy share house, for about $300 a week, and said the money wouldn't go as far for a central location back home.
"The difference in rent was nuts," she said about her house-hunt last month.
"I don't think I would be able to afford a room like that in Sydney."
While Sydney and Melbourne are often pitted against each other for cultural supremacy, the two cities are clearly divided by one major factor.
According to data from Finder this year, Sydney is 22 per cent more expensive to live in than Melbourne.
Additional statistics show housing supply issues to be a key factor driving up Sydney prices.
Interstate removalists Muval reported Melbourne drew the most metro inbound moving enquiries from their clientele this year.
Meanwhile their latest data showed Sydney held the most outbound requests in September, with almost one in three metro requests leaving the Harbour City.
But are rent and mortgages becoming the main draw for people making the interstate move, and does it also stack up for other cost of living areas?
There is a "massive gap" in price between the typical dwelling in Sydney and Melbourne, according to CoreLogic's head of research Eliza Owen.
As of November this year, their data showed the average value discrepancy is sitting at a record high of $345,000.
The biggest reason for this is supply.
"The gap in completions across Victoria versus NSW, has widened over time," Ms Owen said.
Premier Chris Minns recently announced a major housing development to replace Rosehill Racecourse, saying Sydney had the lowest rate of dwelling completions in the country.
"We produce six houses per 1,000 people every 12 months in Sydney, Victoria produces eight, and Queensland produces nine," he said. 
In the past 15 years, there were about 21 per cent more dwellings completed across Victoria, than NSW, Ms Owen said. 
"It would take 12-and-a-half years for the median income households to save a 20 per cent deposit across Sydney, relative to about 9.6 years in Melbourne."
According to PropTrack senior economist Eleanor Creagh, Sydney house prices over the past year grew 8.4 per cent, compared to Melbourne's 1.39 per cent. 
The pandemic plunged both cities into a lower rental market, but overall rental prices in Sydney have rebounded "at a much greater rate", Domain's Nicola Powell said.
Again, the lack of supply drives up competition, and in turn, rental prices.
The average rent across Sydney is about $740 a week for a new lease, compared to $560 across Melbourne. 
"Your gap is sitting at record-high levels of $176," Ms Owen said.
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Geography also restricts housing expansion in Sydney, a city girt by an ocean, mountains, and national parks.
"Some of the cheaper pockets of Melbourne are also in the further afield western suburbs where you've got a lot more urban sprawl," Ms Owen said.
Ms Powell said Sydney's geographical restrictions drives higher premium for land prices.
"Sydney is contained … and Melbourne doesn't have that barrier," she said.
However, Sydney could prioritise medium-density housing in many suburbs, where councils are too concerned about preserving "all of this heritage building", Ms Powell said.
"Understandably, it's not the most profitable kind of development for investors … [But] I think if you can better the feasibility for medium density, then there's a lot you could do to increase the amount of housing supply in Sydney."
A report by the NSW Productivity Commission found in 2020 that the cost of building new dwellings in Sydney was far more expensive, due to taxes it incurred.
"The research found that in Sydney, nearly 50 per cent of the cost of a new house and land package is incurred through red tape, taxes and charges," the report found.
The research found that the comparable cost in Melbourne was 37 per cent. 
Ms Koster said that while rent is "a lot cheaper" in Melbourne, she's noticed food has been more expensive, especially eating out.
Budget Direct's cost-of-living comparison chart shows grocery prices in Sydney are 1.59 per cent higher than Melbourne.
Restaurant prices, on the other hand, are 2.52 per cent lower in Sydney than Melbourne.
Public transport is also similarly priced, but Melbourne's free zones and annual pass discounts ultimately triumph over what Sydney's extended weekend travel and off-peak discounts offer in savings.
For people who don't use public transport on a daily basis, the costs work out to be "pretty much identical", University of Sydney senior transport lecturer Geoffrey Clifton explained.
But Ms Koster said flat rates on the tram mean she's paying $10 each way for a couple of stops into the office, as opposed to the Opal system's distance- and time-scaled pricing.
Drivers are both encountering and paying less on tolls to get around in Melbourne, but there isn't a huge discrepancy on petrol prices compared to Sydney.
The average for regular unleaded sits at about $1.90 for Sydney, compared to $1.92 in Melbourne, according to NRMA head of media, Peter Khoury.
"So neither city is really covering itself in glory when it comes to offering cheaper fuel to its residents," he said.
As for utilities, electricity use in Melbourne is between 20 to 30 per cent lower than Sydney, energy expert at the Grattan Institute Tony Wood said.
"That isn't because [Victorians] use less energy, it's because some of their energy comes from gas," he said.
Colder temperatures mean a higher dependence on gas in the city, especially during winter for heating.
"When you look at the way Sydney people use gas … it's really only used for cooking and maybe hot water, the actual cost of having the gas connection at all tends to dominate a higher part of the gas bill," Mr Wood said.
Ms Koster said that while she has been "overall better off financially", a move to a cheaper state or regional area would be even easier on the pockets.
"The housing was probably one of the big aspects, but if you're looking at everything else [other expenses], Melbourne is exactly the same if not a little worse than Sydney."
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