The Australian Bureau of Statistics released population data for the March 2020 quarter. This data effectively misses the effect of Coronavirus-related restrictions, which really hit right at the end of the March quarter.
As a result, population growth was a robust 114,000 people in the quarter (+357,000 over the year) or 0.4% and 1.4% growth respectively. Yet growth – even before this year’s shock had decreased – a year ago it was +394,000 over the year. The decrease effectively reflects net overseas migration (NOM) which fell to 221,000 from 251,000 a year prior – but still accounting for the lion’s share of population growth in the country.
The downturn was centered in NSW (read: Sydney) with NOM falling from 90,000 to 68,000 in the harbour city. The downturn was less drastic in Melbourne (89,000 to 73,000), while NOM was little changed in QLD, and actually up in SA and WA. NOM pulled back in the ACT. Perhaps Sydney is choking on its own success, with strong population growth in a largely landlocked area leading to eye-watering housing costs.
I always like looking at the net interstate migration (NIM) data as to me this says a lot about livability in Australia and relative employment prospects and housing affordability. Interestingly – and as I’d expected – Victoria is now pulling back in the NIM stakes. As anyone who has lived in Melbourne recently, even before this year, that will largely come as no surprise. Too much. Queensland is remaining strong in attracting residents and WA is bouncing back. Expect this trend to accelerate when residents are able to leave Victoria again.
The latest upswing in the housing market (which began in the September 2019 quarter) has proven short-lived. According to the ABS, national dwelling prices fell by 1.8% in the June quarter, although they remain 6.2% higher than a year ago (well ahead of wages growth).
Canberra was the only capital to improve in June (+0.8%), reflecting its significant public sector nature and thus resilience amid the chaos of 2020. The biggest declines were in the large markets of Sydney (-2.2%) and Melbourne (-2.3%). Again, no surprise as these large cosmopolitan cities are reliant on tourism/international education flows and related economic activity. The chart below shows how growth over the year has changed.
Dwelling price growth is generally decelerating, with Canberra and Perth going the other way. More interesting will be whether Coronavirus impacts will have longer-lasting impact on the housing market. Anecdotally, I’ve heard of multiple people wanting to leave Melbourne, partly for political reasons and partly as increased working-from-home practices can allow for a ‘tree change’.
My hunch is that we will see this play out, to the detriment of Sydney and Melbourne markets and to the benefit of regional markets and smaller state capitals.
While house prices are still falling (August marked the fourth consecutive monthly decline) , housing finance showed a strong rebound in July.
The rebound was very much driven by owner occupiers, investors remain conspicuously absent from the property market, at least in comparison to recent history.
Owner occupiers are being tempted by super low mortgage rates and hunks of meat thrown by policymakers to encourage first home buyers. It’s interesting as it’s quite a good time to be a renter as well due to the shock to tourists and international students sucker-punching landlords.
If you’re not a homeowner yet, it would not be a bad time to take advantage of low rents and keep building a deposit while waiting to see how the market behaves – particularly in Sydney and Melbourne, where coronavirus effects have been strongest.
On the other hand, waiting to get into the market won’t work so well if you’re looking at regional areas – which have soared in popularity for obvious reasons this year.
Bank share prices have stumbled recently, if the market pulls through, there could be some value on the table.