Parochialists have long made a sport of debating whose city has the best beaches, the finest harbour or the most beautiful people. Sydney has always had the most expensive property. While the depth of its blue chip waterfront property may ensure that mantle remains unchallenged, Melbourne is catching up, especially at the higher end of the market. The Real Estate Institute of Victoria's (REIV) September Property Update revealed that the median price of a house in Melbourne has increased by 6.4 per cent since August to A$520,000 (HK$3.7 million) - the highest increase the institute has ever recorded. The most significant increases were recorded in the inner suburbs, where the median increased by 4.8 per cent to A$815,000, followed by the outer suburbs. Enzo Raimondo, REIV's chief executive, cited strong demand from a growing population, record-low interest rates and financial assistance for first-time home buyers as influencing factors. But David Airey, president of the Real Estate Institute of Australia, said another reason was that Melbourne's 'livability' was giving Sydney a good run for its money. 'There is no doubt Melbourne is a very livable city,' said Perth-based Airey. 'There seems to be better employment opportunities in Victoria, and greater opportunity for new housing developments. Melbourne is also a lot easier to get around, with a sensational transport system of trams and trains.' Raimondo agreed. 'It's a great city, with wide open tree-lined streets, large parks and a diverse community that enriches the culture and helps make it an exciting city to live in. Our schools have a good reputation and the universities host a large international population.' Matthew Bell, an economist at Australian Property Monitors, said the trend showed no signs of abating. 'In June 1999, the median price of a Melbourne house was 61 per cent of the Sydney median priced house. 'This proportion varied slightly, but by December 2004 remained at close to 60 per cent,' Bell said. 'Between the end of 2004 and mid-2009, however, Melbourne house prices have continued to rise, while the median house price for Sydney is actually slightly less than it was in the December quarter of 2004. So, during this period, the Melbourne median house price as a proportion of the Sydney median house price rose from 61 per cent to the present historic high of 84 per cent.' The effect was just as pronounced for units in the two cities, Bell pointed out, with the proportion rising from 66 per cent in June 1999 to 91 per cent in June this year, and seemingly headed towards parity. 'There is no doubt that the great divide between the two cities has been closing, with the majority of this convergence happening during Sydney's hangover from the 2003-04 property boom, which has lasted until 2009,' he said. 'With Melbourne continuing to show at least as strong growth rates for both houses and units as Sydney in the last few quarters, this trend shows no sign of abating.' Michael Bentley, managing director of Citylife Property Group in Hong Kong, concurred. 'Melbourne house prices have risen on average by 9.4 per cent a year for the past 43 years, according to analyst Bis Shrapnel, which means the average Melbourne house price will be more than A$1 million in just 12 years if prices rise at the historical average,' he said. Melbourne has also become the favourite of a growing number of Chinese who are taking advantage of a relaxation in Australia's foreign investment laws. Real estate agents in the eastern suburbs have reported that up to half the buyers this year had been from the mainland, Hong Kong or Taiwan, or Asian companies buying accommodation for their employees. John Bongiorno, a director of agent Marshall White which has offices in the leafy inner suburbs of Armadale and Hawthorn in Melbourne's east, said interest from the mainland was so strong that the firm was thinking of setting up an office in Shanghai. 'We sell over 100 properties a month, with an average sale price of A$1.5 million, and nearly 20 per cent of those sales would be to mainlanders,' said Bongiorno, who is working on business alliances formed during a recent trip to the mainland. In the 1970s, he said, Hong Kong investors dominated the overseas buyer bracket, but in the past decade that stream had closed to a trickle when compared with buyers from the mainland. 'And may it continue,' he added. Taiwan-born auctioneer Robert Ding Chen-long, of Jellis Craig in Balwyn - another Melbourne eastern suburb - said interest was so strong he had started holding auctions in Putonghua and English. The first one went well - achieving more than A$1.8 million for a house in Balwyn - and now he does one or two bilingual auctions each month. Ding estimated 35 per cent of the firm's sales in the cities of Boroondara, Stonnington and Whitehorse were to Chinese buyers. Of these, he said, Balwyn, 10km east of Melbourne's central business district, was a standout favourite.