Regional towns being slammed by Sydneysiders isn’t the answer to housing crisis

Young people are told to move to the regions to afford property but this wave has caused mayhem in many areas.

When it comes to housing affordability, young people are often told to move to regional areas or interstate where housing is more affordable.

This is a viable option in principle, if that individual or family is willing to part with their existing support network of family, friends and community, while simultaneously holding onto the higher capital city income.

But when applied at a society wide level, even a relative trickle of households out of a large capital city such as Sydney can put upward pressure on housing prices in regional areas, even though the total number moving in a given year is less than 1 per cent of the city’s total population.

In a recent paper, economic research group the e61 Institute, explored some of the underlying numbers amid what it called ‘Sydney’s Millennial Exodus’. It found that the largest number of existing residents leaving by demographic in net terms was those between the ages of 30 and 40.

When compared with a similar but significantly smaller population outflow trend from Melbourne between 2011 and 2016, in net terms it was only adults over the age of 40 leaving, with by far the largest age demographic leaving are those in their 60s.

This reflects the historic trend of older Australians from the nation’s south east choosing to retire somewhere warmer, such as the NSW North Coast or South East Queensland.

The e61 paper went on to conclude that housing affordability was the prime suspect. Their research found that Sydneysiders were leaving the areas where housing prices had risen the fastest.

“For every extra percentage point that an area’s housing prices grew in the five years to 2016, an extra 0.2 per cent of the population left in the following five years.”

Where are they going?

The study found that the most popular destinations for those leaving Sydney during that time period were:

– Newcastle

– Hunter Valley

– Mid North Coast NSW

– Wollongong

– Canberra

– Gold Coast

– Sunshine Coast

The hard numbers

On average over the last 20 years of data assessed by e61 which covers from the turn of the millennium to 2021, an average of 0.5 per cent of Sydney’s population leaves to live elsewhere in Australia. As of the latest data from the ABS, an estimated 36,155 people (roughly 0.7 per cent of the population) left Sydney in net terms to live either interstate or in a different part of NSW.

To put this figure into perspective, in the year running up to the 2016 census, 0.4 per cent of Sydney’s population was lost to internal migration in net terms. At the height of outflows during the run up to the 2021 census, that figure rose to 0.9 per cent.

While the proportion of people exiting Sydney, particularly in younger demographics has expanded by an order of magnitude, compared with the overall population it remains a relative drop in the ocean.

And that is one of the key points in the whole debate. If a small number of people leaving capital cities is capable of driving up house prices and the cost of living in regions, how could the strategy of moving somewhere cheaper be enacted on a grand scale?

What’s the score?

In order to get a handle on the impact of internal migration on housing, we’ll be looking at 10 locales that have been reported as popular with those leaving the capital cities. In these 10 towns or suburbs the average gain in the median house price between the end of 2019 and the peak in housing prices was 71.1 per cent. For units, the average gain was 59.6 per cent.

Despite Sydney and Melbourne being the only areas in the states seeing sustained net internal migration outflows during the pandemic era (according to ABS data), this relative trickle of people moving into the regions and interstate was able to completely up-end the balance of many regional housing markets.

In some relatively small regional Queensland housing markets, transaction volumes more than doubled, as former Melbournians and Sydneysiders bought into these markets, generally with significantly greater levels of wealth and means than existing local residents.

As internal migration flows have somewhat shifted back toward more normal volumes, housing prices in some of the assessed locales have fallen, in some cases quite significantly. But in all of the 10 markets, prices for both houses and units remain much higher than prior to the pandemic.

Societally inapplicable

While a move to the regions has proven to be a winning strategy for thousands of young Australian families, the data illustrates that this comes at a broader cost for regional communities. If a larger proportion of young Australians were to follow this advice and make a move to the regions, it would end up being similar to the pandemic, a lot more buyers with greater than normal local budgets chasing their piece of the Great Aussie Dream.

Ultimately, more Australians are already following the advice to quit cities like Sydney and try to make a life elsewhere in the nation. This is arguably evident in the population flows data from the ABS and the CoreLogic house price indices.

The Sydney and Melbourne markets are both notably weaker than their smaller state capital rivals, Adelaide, Perth and Brisbane. This is in spite these two cities seeing a sizeable majority of inflows of new migrants into the nation.

In the end there are no easy answers to the issue of housing affordability. Strategies like moving to the regions can and do work for some at an individual level, but when applied at a societal level, the unintended consequences would arguably become far greater than any benefit.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator