Propertyology is forecasting a significant transference of housing demand with thousands of residents likely to migrate away from Melbourne and Sydney over the next couple of years, creating beneficiaries elsewhere from internal migration.
Among the unintended consequences of the Victorian state government’s decision to extend Melbourne’s hard lockdown through to 26 October will be a sharp decline in internal migration and double-digit declines in real estate values.
Propertyology has adjusted its outlook for Melbourne real estate in direct response to the Victorian state government’s September 6 announcement to extend the city’s second wave lockdown plans to October 26.
It is our opinion that significantly diminished employment opportunities for years to come plus a fear of future lockdowns will drive plenty of people out of Melbourne.
Whether they relocate to a nearby Victorian regional location such as Bendigo, Wodonga, Ballarat, the Great Ocean Road region or whether they completely leave the state, thousands of Melburnians will take action to regain their freedom.
Prolonged uncertainty surrounding one’s income is unsustainable. Lockdown is no lifestyle!
Propertyology’s latest Melbourne forecast is following a consistent downgrade pattern.
At the end of last year, we ranked the property market fundamentals of Melbourne (and Sydney) as being inferior to most other capital cities [refer here].
In May, the coronavirus onset prompted Propertyology to downgrade Melbourne and Sydney to having the weakest outlooks of all eight Australian capital cities [here are the capital city rankings].
These two cities are the most vulnerable to the loss of international tourists and international students, they are the two most reliant on overseas migration, they have the highest mortgages to service, and the greatest risk of disruptions because they have the highest population density.
For as long as this germ is on planet earth, the property markets of Australia’s two biggest cities will always be the most vulnerable to Covid-19.
Prior to Premier Dan Andrews’ announcement on September 6, Propertyology had forecast that Melbourne’s property market would hold firm and that’s exactly occurred from March through to June.
Very low real estate resale volumes, near zero interest rates and federal government income support packages provide a solid floor for real estate values nationally. But Melbourne is now an exception to this rule.
If there’s one thing that one must have already learned about this germ during the first 6-months of living with it it’s that the greater the population density the more it spreads and that hard lockdowns squash livelihoods.
The change in the number of job advertisements from immediately prior to Covid to right now has fallen off a cliff in Melbourne. As shown in the below graphic, the statewide constraints were starting to also have an adverse effect in regional Victoria however, some recent relaxation of state government restrictions is important news.
We have concern that many Melbourne business owners won’t be able to hold on through a second lockdown, especially with the latest round being much tighter and lasting 3.5-months. It’s very sad!
In Propertyology’s opinion, the hotel quarantine situation and the subsequent decision to enforce a 112-day city lockdown will cripple Melbourne’s economy for several years.
Propertyology will not be surprised if Melbourne’s internal migration numbers a couple of years from now reflect a (net) loss of as much as 30,000 people over the next two financial years [review national migration trends here].
As full-time students of Australian real estate, our studies have uncovered a plethora of evidence which confirms a link between local economic conditions and internal migration trends. A changing pattern in local economic conditions is often the precursor for foot traffic (either in or out of a city depending on whether that city’s own economy is expanding or contracting).
With Melbourne’s economy now likely to become a long-term national laggard, Propertyology is forecasting one of the biggest swings in internal migration by any Australian city ever.
The last time that Melbourne’s economy was soft it lost 20,000 people to internal migration over the 5-years ending June 2012. We fear that a hard lockdown of more than 100-days will be the cause of the biggest shock to Melbourne’s economy that most of its residents have ever seen.
Perth is another high-profile example of changing economic fortunes linked to internal migration trends. An economic powerhouse throughout the Noughties decade, its population quickly swung from boom proportions to mass exodus from the mining downturn. Perth lost 21,000 people to internal migration over the 4-years ending June 2019.
It is therefore highly possible that Melbourne could lose as many as 30,000 people over the next couple of years to internal migration.
Geelong’s property market has also weakened as a result of Premier Dan Andrews’ suggestion on 6 September that it will be subject to a similar Covid suffocation policy as Melbourne.
Property markets look much healthier in the rest of Victoria where housing supply is very tight, real estate is affordable and local economic profiles have reduced vulnerability from Covid impacts. They will be among the beneficiaries of the transference of housing demand.
Having already attracted large volumes of internal migration for many years, Bendigo, Ballarat, Wodonga, and Warragul have long been popular for those seeking a region relocation. These cities offer great lifestyles and incredibly affordable housing. When someone needs to go to Melbourne, the commute by road or train isn’t cumbersome. And their economic profile is less vulnerable to Covid (health, education, agriculture, manufacturing, domestic tourism).
While some residents who relocate will want to remain close to Melbourne others will cast their net right across Australia. The beneficiaries of the transference of housing demand will be widespread.
Hobart is one such example. Just last week, as a means of describing the current strong buyer activity to us, a Hobart real estate agent told us a story of a basic property which had 40-groups inspect it within a few days of it hitting the market, multiple offers were received, and the successful buyer was a couple from Melbourne who purchased it sight-unseen with the intention of relocating away from Melbourne as soon as the state border opens.
As a means of finding freedom and reducing the risk of future lockdowns, a region relocation is a perfectly logical question that thousands of Melbourne households will have.
People aren’t at all afraid of leaving big cities – lots of people don’t like them. Sydney lost 25,000 last year alone without any influence from a health pandemic. The opportunity for affordable housing, alternative employment, and a low-Covid-risk lifestyle could easily draw as many as 40,000 Sydneysiders out of town.
Right now, the property markets in Melbourne and Sydney are in stark contrast to what is happening right across the rest of Australia. On a daily basis, Propertyology’s buyer’s agents have observed upward pressure on (both) property prices and rents.
Job advertisements have accelerated since May and people are growing in acceptance that Covid may be with us for many years. They are getting on with their lives; the glorious spring weather has arrived.
Real estate agents do not have enough stock to sell. First home buyer activity is currently running at record-pace and the HomeBuilder stimulus package is very popular. Existing homeowners are pouncing on these low interest rates and trading up.
Strong buyer activity is causing regular multi-offer situations and price acceleration across the country.
Propertyology remains confident that most Australian property markets have a better than average chance of recording growth in real estate values for the 2020 calendar year. The media headlines refer to Sydney and Melbourne and ignore elsewhere.
Well-informed property investors also recognise that large parts of Australia have incredibly low rental supply, yields of circa 5 percent and a positive growth outlook.
Propertyology are multi-award-winning buyer’s agents and national property market analysts, helping everyday people to invest in strategically-chosen locations all over Australia. The firm’s success includes being 2020 winner of Buyers Agency of the Year in REIQ Awards For Excellence. Managing Director Simon Pressley is a REIA Hall Of Fame Inductee and a three-time winner of the REIA and REIQ Buyers Agent of the Year award.