Sydney has become the art collecting capital of Australia having pushed Melbourne into second place despite the southern city holding the title for the last half century. Already, most of the art auction action has moved north with 13 sales being held in Sydney this year compared with eight in Melbourne. And even then two of the Melbourne sales are trial runs by newcomers Bonhams & Goodman and Deutscher and Hackett.

The latter firm is a breakaway from Deutscher-Menzies where both Chris Deutscher and Damian Hackett were directors until leaving last year. Melbourne-based Deutscher-Menzies once held all its sales in the home city until it tried one in Sydney and now holds half its four annual auctions there.

Since the art market really took off in 2000, a major portion of all works sold at auction, whether in Sydney or Melbourne, has gone to collectors north of the Murray. Now Australia’s biggest commercial art dealer, Denis Savill, has decided after nine years running a gallery in Melbourne to close it and focus on his Sydney operations where he has had his Paddington gallery for more than 20 years.

When he opened in South Yarra in 1998, Savill promised to “muscle into Bleak City” and show the locals how to sell art. He has certainly done that but now says his Sydney gallery is doing so much better, that there’s so much more money in the harbour city, and that it is not worth paying $450,000 a year in rent and salaries to keep his Melbourne shop open.

“There are hundreds more collectors living in $10 million-plus homes in Sydney than there ever will be in Melbourne,” he says. “But the main issue for us is that the supply of stock in Melbourne is drying up. What we were able to buy in Melbourne in 1998 has fallen away completely; if we could acquire today what we did then we wouldn’t be leaving.”

Then again, Savill admits the amount of paper work running two galleries in two cities, along with staff wages, the GST and the 20% premiums the salerooms charge buyers, has forced him to consolidate.

He says there is also the fact he sells five times more paintings “sight unseen” through his catalogues and web pages than he ever has in the past. The top painting in his current exhibition in Sydney – one of Arthur Boyd’s Shoalhaven works – was sold to an overseas collector as soon as it appeared on the web.

“That means I don’t have to staff a second gallery and keep it open seven days a week or try to find a top salesman to persuade collectors they should buy a picture,” he says. “We don’t have to go busting our nuts if we can sell paintings over the internet.”

Auctioneers agree that finding top-quality pictures is becoming increasingly difficult so how will ten salerooms survive when a downturn inevitably strikes? Savill says a “turf war” has already started in Melbourne and he has no doubt the casualties will be severe.