Changes to a jurisdiction’s population size are influenced by births, deaths, interstate migration, and overseas migration. Of these contributing factors, the interstate migration component has always been the most significant from an investor’s perspective.
It is a big decision for a household to relocate interstate. When this occurs in large volumes, it raises the question of ‘why’ are so many people leaving one state and (given there are seven other states to choose from) ‘why’ are so many attracted to other states? The answer to these questions can provide investors with important insight about property markets.
Property markets generally are a reflection of local economic performance and confidence. Looking back over time, interstate migration trends are a bi-product of rises and falls of industry sectors that play a key role within the economy of certain states and territories.
The charts below plot the annual change in median property prices (orange line) against interstate migration (blue columns).
Record high world demand for iron ore (a key ingredient for steel) and gas (a clean energy source) triggered a mining boom with Western Australia’s economy being the primary beneficiary for 15 years from the late-1990s. This was directly reflected in WA property markets, including Perth, where property prices increased by 151 per cent over the five years ending 2007. As demand for skilled labour intensified, the significant wage growth attracted large volumes of interstate migration to Western Australia between 2004 and 2012.
A sharp decline in demand for iron ore and gas from early 2014 lead to significant job losses. 43 consecutive quarters of positive interstate migration came to an abrupt end in June 2014. In the 2016 and 2017 calendar years, a combined 25,951 residents left WA for another state, many going to Victoria.
New South Wales
As with all of Australia (capital cities and regional Australia), stimulus associated with the implementation of the Goods & Services Tax (GST) and the strength of the broader Australian economy drove a significant property boom in Sydney for a few years from year 2000. Five different Premiers within 5.5 years (2005 to 2011) did little for local confidence and economic growth, meaning that Sydney’s property market was most underwhelming during a period when most of Australia was very strong. History suggests that interstate migration out of New South Wales accelerates directly after growth surges in Sydney property prices (2001-3, 2010, and 2013-16).
Whereas the New South Wales economy is heavily reliant on the services sector (especially finance and insurance), the Queensland economy relies heavily on the resources sector. The cultural connection between these two states and their contrasting economic profiles is such that interstate migration trends have historically demonstrated an equally-opposite relationship (accelerated outflows away NSW have been aligned with accelerated inflows to QLD).
In the past, Brisbane property price growth has been high when interstate migration in to Queensland has been high although this has not occurred during this current era (2015 onwards). While migration away from Sydney to Queensland has been high, the underwhelming Queensland economy and resultant lack of confidence has curtailed buyer activity, thereby creating modest price growth.
Australian Capital Territory
One in three jobs (33 per cent) in Canberra are in Public Administration & Safety / government (compared to the national average of 6.9 per cent). Interstate migration trends for the ACT are therefore most influenced by federal government labour demand. There also appears to be a connection between Sydney and Canberra’s property markets, with Canberra’s cycle generally lagging a year behind Sydney.
Very affordable housing in Tasmania has the dual benefit of creating scope for bigger price growth during periods of good economic conditions (2002-2008 and 2016-2018) while, even during the State’s recession (2010-2014), property price declines were very modest. Interstate migration is understandably most attracted to the affordable housing and Tassie lifestyle when the economy is performing well. Tourism has become Tasmania’s most important industry while agriculture, advanced manufacturing and education also play an important role.
Like New South Wales, South Australia loses population to interstate migration every year although the driving force for each state is different (in NSW it is housing affordability while in South Australia it has generally been limited employment opportunities). In 2017, South Australia lost 6,071 residents to interstate migration, it’s largest since 1995. While not as big a profile as (say) Queensland and Western Australia, mining is an important industry for South Australia. Its skilled workforce is also active in manufacturing (defence fleet) and agriculture. There is somewhat of a cultural connection with Western Australia and Victoria.
Over the 8 years ending 2008 (pre-GFC), Victoria’s average annual population growth rate was 1.4 per cent whereas it was much higher in Queensland (2.3 per cent) and Western Australia (1.8 per cent). Higher property prices in Victoria and an economy that wasn’t as buoyant as the resources states provided no real attraction for interstate migration. It’s been a different story post-GFC, especially following the downturn of the mining boom and the strengthening of the services sector from 2013 onwards. Melbourne is Australia’s capital for major events. Strong tourism, education (refer international students), and construction sectors have been driving forces behind high job growth since 2013. Melbourne’s property market followed Victoria’s economic recovery. A significant portion of Victoria’s recent spike in interstate migration is a legacy of Western Australia’s contrasting economy.
Australia’s Top End is at the front door of some of the biggest reserves of gas in the world. Construction of a few of the largest gas projects in the world created large volumes of jobs for many years in Darwin. As skilled labour became a premium, interstate migration in to Northern Territory increased between 2005 and 2009. Over the entire post-turn-of-the-century decade, Darwin’s property market was Australia’s best-performed capital city. From 2002 to 2010, Darwin had nine consecutive years when the median house price increased by more than 10 per cent per year.
The absence of new job-creating projects in recent years has seen NT’s economy increasingly struggle. Progressively, large volumes of high-paying employment contracts haven’t been renewed, creating a concerning population exit. Across the 2017 calendar year, the population for the Northern Territory increased by paltry 572 people (and that was entirely due to some existing residents giving birth). 3263 former residents migrated interstate in 2017.
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