Population growth, infrastructure pipelines and rent burdens point to shifting demand across major cities
Sydney showed the strongest gentrification signals among 12 Australian cities assessed in a study by home loan comparison service Compare the Market, with Melbourne, Canberra and the Gold Coast also scoring highly in the gentrification index.
Gentrification is a pattern first identified in London in the 1960s, when higher-income residents moved into and invested in lower-income urban areas. This can reshape demand as households are priced out of previously affordable neighbourhoods and look to suburbs they might once have discounted.
According to the study, such shifts are connected to new businesses and infrastructure works, and can also coincide with higher rents and rising living costs.
Sydney led the list of up and coming areas in Australia for gentrification with a total score of 70.52, ahead of Melbourne (56.06), Canberra (53.85), the Gold Coast (53.21) and Perth (47.09). The analysis linked Sydney’s result to a large pipeline of priority infrastructure projects and a high rent-to-income ratio.
At the bottom of the rankings were Townsville (23.94), Cairns (29.1), Hobart (34.39), Adelaide (34.51) and Darwin (36.79), which were associated with fewer major projects, softer population growth and lower rent burdens.
Meanwhile, the study also revealed falling housing search activity across most markets. Cairns was the only city to record an increase in monthly searches, while Sydney (-3.75%) and Melbourne (-3.54%) posted the sharpest declines. Across all cities reviewed, average search volume dropped by 2.13%.
Population growth over the past decade was highest on the Gold Coast (22.04%) and in Brisbane (21.96%). Melbourne (19.53%) and Canberra (19.89%) also recorded strong growth, which the analysis said can intensify competition for housing.
Cost pressures remained elevated. The analysis put the average rent-to-income ratio across the cities at 44.18%, with Sydney at 58.46% and the Gold Coast at 56.81%. It also reported those two markets had the highest monthly costs excluding housing.
Infrastructure activity varied sharply. Sydney was listed with 15 priority projects, followed by Melbourne with 12. Townsville was shown with none, while Cairns, Darwin and Newcastle each had one.
“Cities with fast-growing populations, rising housing demand and major new infrastructure investment often become more desirable places to live, but they can also see living expenses rise quickly,” said Stephen Zeller (pictured right), general manager of money at Compare the Market.
“As areas become more desirable, demand for housing tends to rise, pushing up prices and putting pressure on affordability. This can make it increasingly difficult for first-home buyers and renters to enter the market, even in cities known for their long-term growth potential.
“When considering buying in an up-and-coming area, it’s important to look past the hype. Focus on what you can realistically afford, how much of your income would be tied up in repayments, and whether the area suits your long-term needs and lifestyle.
“Growth is a promising sign for any city, but it’s still important for buyers to do their homework and compare their options before making a move.”
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