East, West, maybe home is best

Sydney is now showing healthy price growth in the eastern suburbs and the North Shore, where demand is strong from higher income households with good equity, McLeod says. "However, in the outer western and south-western suburbs, residential price growth is still negligible because the lower income groups cannot afford the present price levels. Price growth during the early years of this decade outstripped ability to pay and demand has therefore fallen. This is having a major impact.
"Flats price growth is likely to spread in Sydney in 2008 as the state economy improves, population growth remains strong, Melbourne slows and affordability issues arise, and price differentials between Sydney and Brisbane reduce on increasing rental levels."
Lawless is similarly upbeat about Sydney's prospects. "2008 may spell the end of Sydney's outer suburban plight," he says. "Investors are likely to become more active, chasing strong yields and looking to diversify their portfolio out of shares and into bricks and mortar."
As for McNamara, he has some strong advice for Sydneysiders. "Sit tight," he recommends.
"It's looking a very undervalued market at the moment; it represents better value than it's been for many, many years."

And for those considering a move elsewhere, he counsels against it. "You'll always get better value, dollar for dollar, in Australia's most global city," he says. "After all, do you want to live in a global city or in a Victorian city?"