People moving to Australia who want to make a new life in the country will find that home prices in the big cities are becoming more unaffordable.
There is concern that property prices in places like Sydney and Melbourne, popular with expats from all around the world, are rising and it has become a hot political topic.
The price of a home in the key cities across Australia increased by 11.7% in the 12 months to February 2017, according to the latest data from real estate firm CoreLogic. And since the end of 2008, combined capital city home values have increased by 66.2%.
But not everywhere is experiencing soaring prices. While this is certainly the case in Sydney, Melbourne and Canberra, up 18.4%, 13.1% and 10.4% respectively in the last 12 months, cities like Perth and Darwin have seen values fall and the rises are much smaller in Brisbane, Adelaide and Hobart.
‘It is really important to note that the housing affordability challenges are largely a Sydney and Melbourne phenomena,’ said Cameron Kusher, head of research at CoreLogic. He explained that people moving to other cities will find prices more affordable.
He also pointed out that the popularity of the top two cities means that prices are going to be higher as demand rises in locations where the population is growing but house building is not keeping up.
Traditionally New South Wales and Victoria have much higher populations with most of the increase being in Sydney and Melbourne since 2008. Queensland has had the third highest rate of population growth over the period but less than a half of the state’s population live in the capital city compared to almost 65% in New South Wales and 76% in Victoria.
‘The substantial increase in the population of the two largest states has fuelled increasing demand for housing. Especially when you consider that 51.8% of New South Wales population growth over the period and 62.6% of Victoria population growth has come from either net overseas or net interstate migration,’ Kusher pointed out.
He also explained that more jobs are created in Sydney and Melbourne and this drives population growth which in turn drives up demand for homes. Between December 2008 and January 2017 some 913,330 jobs have been created nationally and of these 28.9% or 263,722 were in Sydney and 33.8% or 308,698 were in Melbourne.
So, the two largest capital cities that combined account for around 40% of the national population have created 62.7% of all new employment since the end of 2008.
Kusher also pointed out that it is clear that both domestic and international migrants are moving to where the jobs are being created, currently the best opportunities for employment are in Sydney and in Melbourne. ‘These migrants need somewhere to live and many coming from overseas and interstate are migrating for well-paying jobs which allow them to purchase residential property,’ he said.
‘From a political perspective, politicians do not want to see the cost of housing falling. We are taught that deflation is undesirable and deflation in the value of the country’s most valuable asset class would have a much broader impact on the economy,’ he added.
Some politians have used rising house prices as an excuse to say that too many people are moving to Australia but the Government said there is no evidence that immigration is having a major impact on housing price as skilled migrants should be earning enough. It has, however, cracked down on foreigners who do not live permanently in the country buying property as an investment and then renting it out or leaving it empty.