Chief Economist Update: Regional Australia's population boom continues
The COVID-19 pandemic has created a population boom in regional Australia, while also leading to a complete turnaround in Victoria’s population growth trajectory.
The latest Australian Bureau of Statistics data on internal migration shows there has been record movement of people from the capital cities to regional areas.
Before the pandemic, the ABS regional internal migration estimates (provisional) data series showed consistent trends.
People in New South Wales were moving to Victoria and Queensland, and after a mining boom-induced migration shift, people in Western Australia were moving to other states. South Australia, the Australian Capital Territory and the Northern Territory were far from being net attractors of people, while regional Australia continued to see a drain of people to capital cities.
The pandemic has led to a number of structural shifts and migration is no exception.
After decades of government initiatives aimed at getting people to move out of congested capital cities to regional Australia, the pandemic appears to have significantly helped and the rate of change has been rapid.
In the September quarter, regional Australia had a net gain of more than 11,000 people from capital cities with regional towns in Queensland, Victoria and NSW being the main beneficiaries.
It was the largest quarterly net loss of people from the capital cities since the ABS started the data series in 2001.
It will be some time before we can definitely say which towns have benefited, but it is likely to be the regional areas abutting capital cities that did the best including the Sunshine Coast, Gold Coast, Wollongong, and Geelong, as well as Northern NSW.
The other big structural change from the pandemic in terms of internal migration is the impact on Victoria’s population growth trajectory.
The ABS data shows a net loss of 3,700 people from Victoria in the September quarter, the largest amount lost since September 1995. For a state that has been a net attractor of people since the global financial crisis, this is a big shift.
It is important to note that Victoria was in a harsh lockdown and borders were shut during that time period.
However, the trend is on par with what we’ve seen in NSW previously, a state that is able to attract the bulk of international migrants but loses high numbers to other states.
Of most concern, the bulk of population movement out of Victoria were people at peak working age from 25 to 44 years.
While Victoria saw net migration out of the state, it was Melbourne that was hit hardest. The time series has been tracked since 2001 and has never come anywhere near the level of people lost in the June and September quarters – in excess of 7,000 people each quarter.
Regional Victoria did well with 9,725 people shifting from Melbourne to regional areas.
It is likely that by the March quarter of 2021, conditions are going to look a lot more positive for Victoria while regional Australia will continue to see growth.
The Property Council of Australia’s office vacancy figures shows an increase in vacancy across Australia. While this could partly be attributed to quite a few new completions, it would be naive to suggest that changes to demand for office property didn’t play a role.
Employees are rapidly coming back into the office as restrictions ease and the economy rebounds; however, most companies are looking at radically different workplaces to before the pandemic.
Office leasing markets will be buoyed by growth in employment in 2021, but that benefit will be pulled back by more people working from home. For most cities, this will mean demand for smaller spaces.
The exception to these lower demand expectations is Canberra, where it appears that any changes to working patterns are being overwhelmingly overtaken by growth in employment. Canberra was the only office market in Australia where vacancy rates held steady in 2020 as a result of increases to government employment, driven by enormous stimulus and health packages.
While Canberra’s office market is the strongest performer in Australia right now, at a capital city level and in terms of price growth, it is also the strongest residential market. Canberra has always been a solid performer but has now jumped to be the hottest property market in Australia.
In 2020, Canberra’s house prices increased by 7.4%, only narrowly beaten by Hobart at 7.5%. And despite high levels of new development, unit prices still rose by 2.3%.
Canberra saw the biggest jump in views per listing on realestate.com.au in 2020 when compared to 2019, as well as increases in rents and first-home buyer and investor activity.
Canberra has also registered its first $3 million plus suburb with Forrest achieving a median of $3.03 million.
The suburbs seeing the best price growth in Canberra are a mix but include some of the most expensive suburbs such as Mawson, Ainslie, Garran, and O’Connor. Canberra has 13 suburbs with $1 million plus medians and all of them, except Yarralumla, saw price increases over the past 12 months.