Contrary to general belief, population growth is not the biggest influence on property prices – far from it, in fact.
There are a range of factors that influence the demand side of the property price equation. Aside from affordability, the biggest influence is economic conditions. Jobs. Jobs. Jobs!
Propertyology’s recent analysis of national job data for the 2017 calendar year concluded that numerous locations across regional Australia may soon see considerable strength build in their property markets. In alphabetical order, Albury, Armidale, Ballarat, Ballina, Bowral, Cairns, Coffs Harbour, Dubbo, Mackay, Muswellbrook, Port Macquarie, Townsville, Warragul and Warrnambool are likely to see increased market activity over the coming year or two.
A marked improvement in local economic conditions was a key driver that transformed 2011-12 property price declines in Sydney and Melbourne into boom markets over the last four years. Similarly, it’s not that long ago that Tasmania was in recession but the remarkable turnaround in its economy now sees Hobart as Australia’s hottest property market by a country mile.
Sustained job growth within a community puts more money in people’s pockets, attracts new people to a region and boosts local confidence. It increases the chances of renters becoming home owners, provides home owners with confidence to renovate, increases demand for local goods and services, and gets more people at open homes.
Tracking trends of job volumes is a more reliable measurement of the direction a localised economy is heading in, rather than looking at isolated unemployment rate.
At a capital city level, Melbourne (10 per cent), Hobart (there it is again ~ 9.8 per cent), Canberra (8.7 per cent) have produced the largest increases in jobs over the last two years. While the measurement of job volumes is far from the only metric that Propertyology look at, it’s no coincidence that these numbers correlate with property market performance.
While Brisbane is (finally) producing some encouraging employment data, inner-city jobs continue to reflect the post-mining boom pinch. The miserable 1.9 per cent increase in CBD jobs over the last two years is not the only disappointing data. CBRE recently reported that commercial office vacancy rates were 16.2 per cent (in other words, one in six Brisbane offices is empty).
The significant number of regional locations that have produced rates of job growth above the two-year national average of 6.6 per cent is reflecting strong regional tourism, a very exciting outlook for Australian agriculture, advanced manufacturing (especially food-related), some good infrastructure projects, and a rebound in (parts of) the mining sector.
The strong growth in retail, accommodation and food, and arts and recreation jobs reflect the sustained strength of Australian tourism. From 5 million international visitors in 2008, Australia is on target for 10 million by 2020. But, it’s more than the traditional holiday hot-spots of Sydney, Melbourne, Brisbane and the Gold Coast that people are now visiting. With more affordable airfares and a significant increase in destinations that now offer direct flights within one or two hours, tourists are exploring alternative attractions throughout Tasmania and mainland regional Australia.
The continuous extra demand from international and domestic tourists is creating new jobs in great cities like Cairns (tropical wonderland), Dubbo (Western Plains Zoo), Orange and Armidale (foodie experiences), Bendigo and Ballarat (our gold rush heritage), and regional Tasmania (because, well, it is God’s country!).
If Queensland can ever get its act together with a serious tourism campaign, the state with more tourist attractions than any other has the potential to set economic records. And, when the cash registers start ringing again, Queensland’s affordable housing and desirable lifestyle will drag interstate migration well above 20,000 per year.
That’s one of the most sustainable growth drivers that any property market could wish for. April’s Commonwealth Games is just a short sugar fix; the state still lacks a long-term tourism strategic plan.
While growth in jobs for regional Australia is well overdue, the 2017 data just supports the trends that Propertyology flagged a few years ago and has influenced our decision on a few locations across that our buyer’s agents are helping people invest in.
Aside from Australian tourism, the millions of extra people entering the middle class each month during the Asian Century have an enormous attraction to our produce. This nation that was first built off the sheep’s back is now Asia’s food bowl. Universities have recently experienced an unprecedented increase in agriculture-related degrees. And new manufacturing jobs are being created by food processing businesses such as abattoirs, cheese factories, and wine making.
Renewable energy is a fast-emerging sector that benefits regional economies more than capital cities. Household budget pressures and environmental pressures are the trigger for billions of dollars already being invested in job-creating wind, solar and battery projects across this vast country.
2017 was one of the strongest years for job growth in Australian history, with a 5.7 per cent increase in volumes for the year. And it wasn’t a year in isolation – total jobs in Australia for the last two calendar years have increased by 6.6 per cent.
Closer analysis of ABS data shows that the industry sectors which produced the largest rates of employment growth in 2017 were health (104,317), construction (100,664), retail (60,064), education (40,991), accommodation and food (36,485), and agriculture (28,901).
A 2017 net job loss occurred in manufacturing (85,060), admin and support (28,698), public admin and safety (27,433), and mining (4,688).
One would assume that a significant portion of manufacturing job losses in 2017 related to Toyota and Holden plant closures (Adelaide and Melbourne) late last year.
The health sector is Australia’s biggest direct employer (13.3 per cent of all jobs). The recent growth in the health sector is indicative of our aging population combined with the rollout of new positions under the NDIS program.
Propertyology believes that Australia’s construction industry (the backbone of our economy) is now at an interesting cross road. Completion of the mining construction boom in 2012-13 resulted in large volumes of workers in this sector being redeployed to new residential construction roles in our biggest cities. Nationally, construction industry jobs increased from 995,000 in November 2012 (8.8 per cent of total Australian jobs) to 1,163,000 at the end of 2017 (9.3 per cent). What’s already blatantly obvious is that the current volume of construction jobs on residential projects is not sustainable. What Australia now needs most is to put more of this skilled labour to work on nation-building infrastructure projects such as hospitals, transport projects, freight-moving projects and new tourism projects.
Employment data can be volatile with the possibility of significant fluctuations from year to year however, they are always worthy of further investigation. It’s never one metric; it’s the sum of all metrics which makes a well-informed investment decision.
For more information about how Propertyology’s thought-leading research and award-winning buyer’s agency service can help you, telephone 1300 65 40 70 (Mon-Fri, 8am-5pm) or email here.