How one demographics expert views Australia’s real estate future

Regional v metropolitan

One of the biggest population changes that have defined the past two years has been a shift away from metropolitan lifestyles towards more relaxed and spacious regional locations. Spurred on by the COVID-19 pandemic and new work-from-home systems that were induced to combat its spread, net migration from metropolitan to regional areas across the past two years is now double the amount seen in the two years preceding the pandemic.

One of the main factors driving Australians – in particular young Australians – to regional locations is affordability. Mr Kuestenmacher noted that as the current Millennial generation enters the “family formation stage of the life cycle”, they move away from the inner city towards regional areas. This is a trend that has resulted in inner areas of both Melbourne and Sydney “bleeding out”, as Millennials hunt for space and affordability.

“They [Millennials] now hit the highway and they drive, and they immediately jump out of the car once they can afford a house,” he said.

This regional shift is also attributed to the working-from-home systems that the COVID-19 pandemic has induced, which has played into the restructure of Australia’s population spread.

“Before the pandemic, Australian capital cities very much looked like a fried egg, where all the jobs [were] clustered in the city centre. But now, during the pandemic, we almost took a spatula to [it], and we created a scrambled egg city.

“Now, more and more workers are at least somewhat free to choose where they live. So, we’ve seen the people that leave the inner city, where people paid a premium to live close to the CBD, because they wanted to avoid the long commute. Why bother paying this premium now? I’d rather go to a lifestyle location that might be in regional Australia.

“All those beautiful cities along the coast, all those tree-change locations inland, they really boomed because people figured, you know what? I can move there and then commute into the office occasionally,” he added.

Mr Kuestenmacher outlined how this shift has not resulted in all regional centres growing, with the booms occurring in those cities “within a two-hour drive from a major CBD, from a major employment centres, those were the boom regions, because this enables young Millennials to still go back to the office occasionally once a week, twice a week max”.

Migrant behaviour

Another defining trend that will dominate the Australian real estate market is the re-emergence of the migrant community, which Mr Kuestenmacher said will assist the recovery of these inner-city “launchpad suburbs” depleted by the outward migration of Millennials.

“Migrants, once they first come to Australia, they move into launchpad suburbs. It’s the predictable same number of launchpad suburbs that are in the inner city, near employment centres, near education centres. And it just happens to be in Australia that our largest universities are in our largest cities and are in the city centre,” he said.

“Therefore, migrants will move to those clusters, which is good in the short term, because the only segment of the housing market that suffered a bit was the inner-city rental type of market. Those new arrivals, they will be renters.”

He stated that the influx of post-pandemic migration would ensure the inner areas of our major capital cities will remain a hotbed for investment, as the growth “will soon be back to pre-COVID levels simply because we are growing our largest cities at over 100,000 people per year, which is huge growth”.

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