By Joseph Ballota June 12, 2023

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After the pandemic, are Aussies moving home from the regions?

Property Investment
After the pandemic, are Aussies moving home from the regions?

Over the past year, we've noticed some positive changes in regional rental markets.

They're still quite competitive, but we're starting to see a slight improvement.

Does this mean that the trend of people moving to the regions during the pandemic is now being reversed?

Are people flocking back to cities now that they have reopened and everyone is returning to their office jobs?

Well, according to PropTrack Economist Angus Moore, using the housing data as a bit of proxy for population data, then it suggests, yes.

He further said:

"In some regions, we’re seeing the population move back – particularly in some of the “lifestyle” regions - and housing markets have weakened in these areas as a result.

But in other regions, we haven’t seen that reversal.

While we aren’t seeing the same strong shift into these regions and housing outperformance that we did during the pandemic, we also aren’t seeing signs that internal migration to these regions has slammed into reverse."

Historically, there has always been a net migration from cities to regions, but during the COVID-19 pandemic, this movement intensified significantly

Actually, the population growth in regional areas during the pandemic wasn't all that remarkable.

If anything, it was slightly lower compared to the average growth we've seen in the past few decades.

What really stood out was that the population growth in regional areas surpassed the growth in capital cities, which is quite unusual.

Usually, it's the other way around, with cities experiencing greater population increases.

Mr Moore explained:

"This difference in population growth in large part explains the relative performance of regional property markets during COVID.

Prices grew substantially faster in regional areas than in capital cities, and rental vacancy rates fell to extremely low levels in mid-2020 and have largely stayed there since."

He pointed out that there were two factors that drove the gap between city and regional population growth:

First: net overseas migration collapsed

The main impact was felt in the population growth of capital cities since most recent migrants tend to settle there.

However, regional areas were also affected, albeit to a lesser extent, as some migrants did choose to move there.

Second: net internal migration to regional areas surged during the pandemic

During the pandemic, there was a significant increase in the number of people moving from capital cities to regional areas, which is a typical migration pattern.

This larger influx of people into the regions helped compensate for the decrease in overseas migration and resulted in a decline in population in the capital cities.

Well, the question is, was the surge of people moving to regional areas during the pandemic temporary?

Will those individuals eventually return to the capital cities, causing a reversal in net migration towards regional areas?

What have we seen since the pandemic?

According to Moore, since timely data isn't available, he used the timely housing market data to get a sense of if people are moving back.

In particular, he looked at what has happened to home prices and rental vacancy rates.

Based on the chart above, we can see that housing markets in some of the “lifestyle” regions in NSW and Victoria that were popular during the pandemic have underperformed over the past year.

Some popular areas like Richmond-Tweed (which includes Byron Bay), the Central Coast, Mornington Peninsula, the Illawarra and Southern Highlands, and to some extent, Hobart has been facing challenges in their housing markets.

These areas have experienced higher increases in rental vacancy rates and larger price drops compared to the national average.

Mr Moore further explained:

"Those outcomes – softer rental markets and falling prices – are consistent with an at least partial reversal in the trend of people moving from the cities to the regions.

But this story is not writ large across regional Australia.

Regional WA and SA have not even seen home prices fall, and rentals markets have remained tight, with little sign of improving.

The same is true for much of regional Queensland, including the Gold and Sunshine Coasts, where housing markets have softened, but not by as much as in some of those worse-performing markets.

Similarly, regional centres in Victoria and New South Wales - like Geelong, Ballarat, Bendigo and Newcastle - have also held up fairly well.

Prices have fallen, and rental markets have eased a little; but they haven’t seen the same pullback as some of those pandemic “lifestyle” regions."

What does this mean for the regions?

According to Moore, while we won’t know for sure until we get population data, housing market data suggests some of the shift to the regions was temporary and is starting to unwind - particularly in places like Byron Bay.

Interestingly, it appears that at least for now, some of the population shift to regional areas is becoming permanent.

Many of the people who relocated during the pandemic are choosing to stay in their new regional homes.

This trend seems to be especially noticeable in larger regional centres and in the states of Queensland, Western Australia, and South Australia.

Source of charts and commentary: REA Insights

About Joseph Ballota Joseph is a Property Coach who put hundreds of people on the road towards wiping away their mortgage in under 5 years through expert Property Investment Plans.