Sydney has lost its title of having Australia’s most expensive median house price to Byron Bay in Northern New South Wales, according to research by Propertyology.

New research has identified the top 40 most expensive cities by median house price, with the nation’s most valuable real estate located in a city that ranks only 73rd in population size. Byron Bay is home to 34,500 people and has a median house price of $987,500 as of December.

The regional city’s median house price rose by a whopping 64% over the past five calendar years.

In comparison, Sydney and Melbourne both produced a 44% growth over the same five years to record a median house price of $950,000 and $772,500, respectively.

The price gap between Australia’s two largest cities and its most expensive one was likely to widen further, according to Propertyology Head of Research Simon Pressley. The reason? House prices in Byron Bay continue to climb, while in Sydney and Melbourne, they continue to fall.

Melbourne didn’t make it to the top-five list for expensive major regions by median house price.

“Ahead of Melbourne, in sixth place, are three other major regional locations: Kiama and Wingecarribee, both in New South Wales, as well as Victoria’s Surf Coast,” Pressley said.

Wollongong, Noosa, Ballina, and Canberra completed the top 10 most expensive major locations.

The data showed that seven of the 10 most expensive major locations in Australia are in regional areas, Pressley said.

Byron property market’s growth

Byron’s median house price has risen by an average of 10.1% annually over the past 20 years – the highest rate of growth of any Australian city, according to Pressley. In 1998, the median house price in Byron Bay was only $140,000

“It’s staggering that Byron has averaged double-digit growth every single year for two decades. I doubt whether there’s another city anywhere in the world that has done that,” he said.

In addition, Byron’s average annual population growth rate of 0.9% is well below the 17-year national average of 1.5%.

“Byron’s status is the ultimate proof that the size of a city’s total population or the annual rate of population growth [is] not the biggest [driver] of property prices because, as I always say, there are a large number of factors which influence property markets,” Pressley said. “In Byron’s case, housing demand is primarily driven by the affluent, middle-aged, Australian-born couple. Census data shows Byron’s median household age is 44 – compared to the national average of 38 – and there’s a below-average number of children per household as well.”

The research also found that a higher percentage of households in Byron own their dwelling outright (36%) than the national average (31%), despite its high house value.

Byron’s desirable location in Northern New South Wales translates to strong buyer demand, which pushes prices up. The insight is especially true in recent years given many of its new residents reside in Byron while running businesses from home or commuting to other capital cities, said Pressley.

“Byron is only a two-hour drive up the highway to Brisbane or a one-hour flight to Sydney via Ballina, plus the Gold Coast international airport is also only an hour away,” he said.