Australians on the move as housing affordability worsens

Frustrated aspiring home buyers and renters fed up with high runaway prices in certain markets may resort to moving interstate in 2024, according to analysts. In the latest Housing Affordability Report released by ANZ and CoreLogic, analysts say housing affordability has worsened due to rising migration and interest rates on top of longer-term factors such as governments not building enough social and affordable housing to keep up with demand.

“There is no quick and easy supply response to rising rents and home values,” according to the report. “As a result, 2024 may see more internal migration of prospective first home buyers and renters to markets with relatively low price points.” ANZ and CoreLogic point to data tracking historical net internal migration trends against the current median value of dwellings. “Internal migration was higher across areas with relatively low median values at that time,” the data shows.

During the pandemic, internal migration patterns changed as more people left Sydney and Melbourne, in particular, and relocated to the regions. Being able to work from home enabled many families to move to lower-cost markets and attain a better lifestyle. Queensland – especially the Gold Coast and Sunshine Coast, along with regional NSW and Victoria — were key beneficiaries of this trend. In 2022, NSW lost 31,560 residents and Victoria lost 9,955 due to net internal migration, while Queensland gained 34,545 residents, according to the Australian Bureau of Statistics (ABS).

The ANZ/CoreLogic report also predicts that more Australians will choose to share a property to save money in today’s cost-of-living crisis. Multi-generational living among families is a rising trend among home owners, and in the rental market, there is surging demand for share houses to make the rent more affordable for individuals. This represents a reversal of pandemic trends, say the analysts.

“In addition to changing location preferences, there could also be some preference shifts around the number of people sharing a household in 2024. The pandemic period saw a notable drop in average household size from 2.55 people per household to 2.49 as of 2023. This may have reflected greater demand for space as more time was spent at home, a temporary rise in available rentals at the very start of the pandemic, and high levels of fiscal stimulus supporting incomes. However, this trend could reverse as more people take up share housing to alleviate housing costs.”

The interest rate hiking cycle is likely coming to an end, which will ease pressure on mortgage serviceability, but the analysts note that a steady or falling cash rate typically results in upward pressure on prices. “Additionally, the current drop-off in new dwelling approvals may hinder housing supply growth for some time. Ultimately, improved housing affordability in the long term is likely to depend on deliberate initiatives to increase housing supply, rather than relying on a temporary downswing in prices or cyclical reduction in interest rates.”

The report also finds that regional markets are not as affordable as they used to be following the pandemic boom. As of October, regional home values are 44 percent higher than at the start of COVID compared to capital city prices being 26 percent higher.

The report also notes a widening price gap between Sydney and Melbourne, with Melbourne the only capital city where affordability for buyers has improved over the past five years.

“More modest dwelling value increases in Melbourne, which has led to Melbourne being more affordable relative to Sydney over time, comes down to more supply of dwellings over the past 15 years,” the report states. “ABS building activity data shows there were around 850,000 dwelling completions across Victoria in the 15 years to June 2023, which is 21% higher than in NSW over the same period.”