The great interstate migration. The COVID-19 pandemic has affected Australia and the rest of the world significantly so where we choose to live and therefore our housing markets are also changing.
Prior to the pandemic, the growth of Australia’s largest cities including Brisbane, Melbourne and Sydney, was fueled mostly by immigration from overseas as well as some migration from other parts of Australia. The Australian government has always welcomed reasonable levels of immigration because it generates jobs and therefore taxation revenue.
This population movement has always been a major driver of real estate values. At Capital Properties we believe there is a strong correlation between the two, especially when you consider the median house prices of the metropolitan areas of Sydney and Melbourne. It’s no coincidence that the most heavily populated cities in Australia also have the most expensive real estate. But what impact will COVID-19 and this ‘new normal’ have in these markets? Is there a shift in immigration and migration? And have the events of 2020 have transformed how capital city central business districts (CBD’s) are being used?
On the go? Here’s 30 seconds of take outs:
- COVID-19 has altered immigration and migration trends.
- Less immigration doesn’t mean stagnation of population as there’s still movement between states.
- Buyers have changed how they purchase investment properties.
- We look at the states with the largest population shifts; Melbourne, Sydney & Brisbane.
- What the pandemic means for capital city CBDs.
- Capital Properties can keep you updated on property trends and investment opportunities.
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Short to medium term impact of COVID
It’s not hard to accept that the pandemic has caused changes to overseas immigration, but what of internal migration and changes within the housing markets due to changed work conditions? In this article we’ll look at where population shifts are now taking place and how this will impact property values in the short to medium term in Australian real estate markets.
Overseas migration. This population growth tap has been turned off!
Over the last 10 years, net overseas migration has been the main driver of Australia’s population growth in Australia, contributing 354,048 per year on the 10-year average. The National Housing Finance and Investment Corporation (NHFIC) states that net overseas migration accounted for 59% of Australian population growth since 2007. And international students make up approximately 50% of this overseas migration.
According to the Australian Bureau of Statistics (ABS) the closure of Australia’s borders in April 2020 led to a 97% drop (from the previous year) of permanent and long-term overseas arrivals, most of whom were migrants. In fact, recent forecasts suggest that due to COVID-19, we will potentially see more than a 50% reduction of migration to Australia in 2021, down to only 153,971.
Migration trends and changes post Covid-19
Since population is a major driver of real estate and the overseas migration tap has been virtually turned off, the big question that remains is are people currently moving and where are they relocating to? We take a closer look at what’s happening in 2 key states, Victoria and Queensland below.
In addition to these changes in migration, there are leading indicators that reflect a change in purchasing quantities. Buyers who would previously have purchased one investment home, are now purchasing multiple investment properties within the same time period.
Current population shifts in Victoria
Although some states and territories have seen numbers decline due to less immigration, the numbers aren’t significant. However, it’s worth noting that in Victoria, Melburnians fled the city and moved across state lines in record numbers. In fact, the Victorian capital grappled with its largest quarterly loss of residents with more than 25,000 people departing Melbourne amid the pandemic’s second wave.
Australian Bureau of Statistics recently confirmed that Greater Melbourne recorded a net loss of 8,000 people in the June quarter, compared with 2,200 in the three months before. This was the biggest quarterly loss since Victorian records began. The data looks at internal migration and does not count international travel, which has also been severely restricted due to the pandemic.
Of those who moved in the three months prior to June, 5,900 people went elsewhere in Victoria, compared to 3,000 for the quarter before, and the rest headed interstate.
Post COVID-19 – what’s happening in Queensland?
Since the start of the COVID-19 pandemic, Queensland has recorded a net gain of 6,800 people (up from 5,400 in the same period in 2019), this is despite restricted immigration from overseas. The population of Greater Brisbane increased by 3,200 residents, up from a 1,900 increase in the March quarter of 2020. These numbers seem to reflect a growing trend.
Why do these numbers matter?
For investors, it’s important to understand where this population growth is coming from. Zero growth means far fewer opportunities, so being aware of the current population trends and predicted future trends is vital.
To date, Melbourne leads the growth numbers with 77,369 and Sydney following with 73,919 and Brisbane is trailing behind with 18,789. However, it’s noteworthy to consider that post COVID-19 current trends show increased migration from Sydney and Melbourne CBDs to regional centres and further north, and in particular to South East Queensland.
Transformed capital city CBDs
The impact of COVID-19 means that many businesses are changing how and where employees work, seeing a huge reduction in commuting to and from CBDs. The big question is how this will impact the way the capital city CBD’s continue to be used.
This sudden transition from the physical workplace into the home office since the COVID-19 lockdowns means that many employees who would not have previously considered working from home, now shifted to successfully working from home over a period of many months. All the signs point to this trend of a distributed workforce continuing into the medium and longer term.
This has and will continue to have a major impact major capital city CBDs. Office workers help sustain all manner of retail stores, cafés, restaurants, hospitality venues and councils to name just a few. In many cases, without this foot traffic, these industries cannot continue to thrive.
Is this the end of CBDs?
It’s certainly true that many businesses are realising the advantage of reducing the size of their office requirement or subletting and are encouraging less everyday commuting. However, most employers realise that it’s still vital to have meeting places for occasional gatherings and face-to-face meetings. As Scott Morrison, Australian Prime Minister says “The reason why businesses bring people together [is] for productivity, to solve problems [and] for culture.”
Therefore, offices and CBDs are likely to remain a very important part of the economy. As much economic activity is currently dependent on a populated CBD, we will need to wait and see how the current trends shift post pandemic.
How Capital Properties can help you
As always, Capital Properties does the hard work in looking at property trends in Australia and globally, so that you don’t have to. Property and property investment is our bread and butter and it’s our mission to share our expertise to help you invest successfully.