What the big workforce split means for property buyers and investors

A split is emerging between regions with strong employment growth in areas like healthcare and technology, and areas still reliant on struggling industries that may suffer stagnation.

About 36 per cent of the workforce usually worked at home, data from last August shows.

The Australian labour market is shifting in ways that may redefine home ownership and property investment for years to come. While the nation boasts record employment and a historically low unemployment rate, beneath the surface lies a more complex reality.

Wage growth is struggling to keep pace with inflation, job ­mobility is slowing, and industries are evolving in response to economic uncertainty. These trends don’t just affect workers – they shape housing affordability, rental demand and investment strat­egies. As we look ahead to 2025, understanding these labour force shifts is critical for anyone navigating the property market.

Australia’s total employment hit new highs, with more than 14 million people currently employed, according to ABS Labour Force data, released mid-January. The unemployment rate also remains low, hovering around 4 per cent, reflecting a resilient economy. However, this headline figure masks deeper shifts in job mobility, wage growth, and industry-specific employment, all of which shape housing demand and affordability.

One of the most critical factors affecting property markets is wage growth. The ABS’s Characteristics of Employment dataset, released in December, indicates that the median employee earnings in main jobs have risen to $1396 a week – a 7.4 per cent rise in the year to August 2024. Median hourly earnings also had a modest uptick, reaching $40 an hour.

While these figures indicate positive wage growth, it is crucial to analyse them in relation to inflation. The Consumer Price Index has also been rising, diminishing the real value of wage increases. The wider the gap between inflation and wages, the more severe the cost-of-living crisis becomes.

Between March 2021 and December 2023, the annual increase in cost prices surpassed wage growth, serving as the primary driver of the cost-of-living crisis. But according to the latest ABS data, the WPI rose by 3.5 per cent in the year to last September, while CPI increased by 2.8 per cent over the same period.

Caregivers are one sector of the workforce seeing wage growth due to demand.

Although an improvement on previous years, wage growth has continued to struggle in keeping pace with inflation, which remains high. This means that while wages are growing, people’s purchasing power is not increasing significantly.

The cost of essentials – particularly housing, food and energy – continues to rise, limiting discretionary spending and making home ownership less accessible. If inflation moderates further in 2025, we may see real wage growth return, potentially boosting confidence in the housing market.

Wage growth trends have a ­direct impact on the property market, as they influence borrowing capacity and home affordability. If wage growth fails to keep pace with rising costs, fewer people will qualify for mortgages, leading to softer demand for housing.

On the other hand, sustained wage growth, combined with easing inflation, could encourage more first-home buyers and investors to enter the market in the coming year.

Another notable trend is the slowdown in job mobility. Only 8 per cent of Australian workers changed jobs in the past year, marking a decline from previous years. In a strong economy, job switching is typically high, allowing workers to negotiate better wages and career growth.

The current stagnation suggests that employees are opting for stability over risk, possibly due to economic uncertainty and cost-of-living pressures.

For the property market, this means lower turnover in rental ­demand, as tenants are more likely to stay put rather than relocate for new jobs. Areas that typically ­experience frequent housing churn, such as inner-city rental hubs, may see a moderation in tenant movement.

At the same time, the reluctance to switch jobs means that wage growth in certain industries may remain subdued. Sectors where employees have greater bargaining power, such as technology and healthcare, are seeing stronger wage increases, while retail, hospitality and manufacturing remain sluggish.

Sectors where employees have greater bargaining power, such as healthcare, are seeing stronger wage increases.

This wage disparity has spatial implications for the property market, as high-income professionals concentrate in major cities and inner suburbs, while lower-wage workers face affordability challenges in urban centres and increasingly look towards outer suburbs and regional areas for housing options.

Industry trends also provide insight into shifting employment dynamics. Healthcare, technology and renewable energy continue to expand, driven by demographic changes and innovation.

Job trends suggest that there will be higher turnover of rental properties in the university corridors and around hospitals. Based on population projections, it is safe to assume that these trends will not diminish over the next decade.

However, wholesale trade and manufacturing are under pressure, with job security concerns hitting housing affordability in suburbs reliant on these industries.

The growth of remote and ­hybrid work models continues to influence housing preferences. About 36 per cent of the workforce usually worked at home, according to ABS data from last August.

Hari Hara Priya Kannan, data scientist at The Demographics Group

Professionals who once needed to live in the inner city are now more open to moving to outer suburbs and regional areas where they can afford larger homes.

This trend has been particularly strong in the technology and finance sectors. Regional housing markets have benefited, with rising demand pushing up property prices in areas that offer strong infrastructure, lifestyle amenities, and proximity to transport hubs.

However, older workers are showing increasing reluctance to move roles, opting for security over potential wage gains. This shift could influence demand for certain housing types, with younger renters gravitating towards flexible living arrangements, while older workers remain in established communities.

The contrast between younger and older workers also plays into long-term property market trends. Some millennial and Gen Z workers are more likely to prioritise renting in lifestyle-oriented locations, even if it means smaller living spaces.

Meanwhile, baby boomers and Gen X, who have accumulated more wealth, are more likely to ­remain homeowners, leading to reduced housing turnover in ­established suburbs.

As baby boomers age into their 80s and beyond, downsizing may become a more pronounced trend, freeing up housing stock in certain markets but increasing demand for townhouses and apartments in well-serviced areas.

The implications of these ­labour force trends on the property market are significant. Wage growth, while positive, is being eroded by inflation, making home ownership less attainable for many.

Rental demand is likely to ­remain high as affordability constraints persist. Regions with strong employment growth, particularly in healthcare and technology, will see continued housing demand, while those reliant on struggling industries may experience stagnation.

If inflation continues to moderate and wage growth outpaces price increases, household confidence could improve, potentially boosting the property market.

Interest rates will remain a key factor to watch. If inflation pressures ease, the RBA may consider rate cuts in late 2025, which would provide much-needed relief to mortgage holders and encourage new buyers to enter the market. Conversely, if inflation remains stubbornly high, interest rates could stay elevated, prolonging ­affordability challenges.

Demographic and employment shifts are reshaping Australia’s property landscape. And the evolving workforce continues to influence where people choose to live, work and invest.

Those who anticipate these changes will be best positioned to navigate the housing market in the years ahead.

Hari Hara Priya Kannan is a data scientist at The Demographics Group