New research from PEXA and Urbis has detailed how the demand for property in Australia’s three largest capital city markets has evolved as a result of the COVID-19 pandemic, for both buyers and tenants.
One of the report’s key findings was a clear trend of consumers migrating to outer suburbia at the onset of the pandemic, potentially seeking more space and embracing new working from home arrangements. The report outlines this trend has recently reversed, as hybrid working has been introduced more widely and more Australian workers are heading back into the office.
As part of this study, Greater Sydney, Melbourne and Brisbane were divided into three segments for analysis: inner, middle and outer rings – with these segments drawn from the 2021 Australian Statistical Geography Standard (ASGS) Statistical Area 2 (SA2) boundaries.
Sydney’s buyer trends
In greater Sydney, outer ring settlements spiked during the height of the pandemic in FY21, up +30.3% on the previous 12 months.
However, this demand has since fizzled out dramatically, with settlements in this ring down -1.2% in FY22 year-on-year. Inner and middle ring settlements have held steady since July 2020.
Melbourne’s buyer trends
A similar trend was identified in Melbourne. Outer ring settlements were up +18.5% in FY21 when compared to the previous 12 months, but this growth slowed in FY22 to an +8% increase year-on-year.
Inner ring settlements dipped -5.7% in FY21, but bounced back +5.6% in FY22, Recovering from the impact of restrictions at the onset of the pandemic, such as border closures. Meanwhile, middle ring settlements experienced the greatest change, having dropped -1.4% in FY21, before soaring to an increase of +23% year-on-year in FY22.
Brisbane’s buyer trends
Brisbane was the only capital city to have growth in all segments across both financial years and while this slowed slightly in FY22, it is clear to see why this market has been the best performing state nationally for settlement volumes.
Inner ring settlements grew by +58.6% in FY21 and a further +35.9% in FY22, middle ring settlements were up +79.2% in FY21 and an additional +19.5% in FY22 and outer ring settlements lifted +42.1% in FY21 and +12.5% in FY22.
These numbers support the rise in demand for housing in Brisbane as net interstate migration exploded, with many homebuyers moving north from Victoria and New South Wales in record numbers.
Rental market
The report also analysed demand in the rental market. During the early stages of the pandemic there was a spike in rental listings as borders closed and governments introduced protections for tenants, however since then, listing volumes have consistently trended down across all cities, with the most notable declines in the middle ring of each capital.
Sydney’s rental trends
Sydney’s rental listings were down across all rings in FY22, with -21.5% fewer inner ring properties available to tenants’ year-on-year. A further squeeze was also evident in the middle ring, which moved from a +2.3% rise in availability in FY21 to a -19.6% year-on-year decline in FY22.
Melbourne’s rental trends
Melbourne’s middle ring rental listings went from strong +21.6% growth year-on-year in FY21, to dropping -21.1% year-on-year in FY22 – highlighting the competitiveness in this market for tenants. Meanwhile, outer ring rental listings bucked the trend and were up +5.4% in FY22 year-on-year, contrasting to the -22.1% decline the prior year.
Brisbane’s rental trends
Brisbane’s rental listing volumes dropped in all regions in FY22. However, more affordable rental housing was available within Brisbane’s inner ring in comparison to other cities, with 17% of listings below $500 per week, compared to 9% in inner Melbourne and 4.7% in inner Sydney.
PEXA’s Head of Research, Mike Gill said: “Throughout our research over the past two years, Brisbane and more broadly, the state of Queensland, has consistently proven to be the standout property market in Australia, evidenced by the inner, middle and outer rings of Brisbane all posting double digital year-on-year increases in settlements in FY22.
“In Melbourne and Sydney, we saw a clear outer ring bias, which has since corrected over the past 12 months as we’ve moved into a more ‘COVID normal’ phase. The middle and inner segments of these cities increased in popularity during FY22, with many buyers choosing to be closer to work and embracing the amenity of our cities now that restrictions have been removed.
“We also found new housing supply was not evenly distributed across regions in our major cities. Our three largest cities exhibited a distinctive ‘reverse donut’ growth pattern, with new dwelling supply concentrated in the inner and outer rings, but far less growth in the ‘middle ring’ suburbs.
“Looking deeper into the middle suburb segment, new housing has been relatively supply-constrained, with demand tending to outstrip supply over an extended period. This trend of the ‘missing middle’ is likely to continue, unless new housing supply is unlocked in order to meet demand from suburban buyers and renters.”
Urbis Director, Mark Dawson said: “The pandemic turned our housing markets inside-out. The more time locked inside, the more people moved out. Now our markets are turning outside-in as those drivers have been reversed – and tenants are rushing back to inner areas. With a comprehensive picture of how our housing markets are working, we must find the missing middle ground. This means looking beyond the transient trends and addressing structural imbalance in the supply, type and tenure of homes – across our cities.”
To learn more about this report, related data or enquire about other property related insights, contact research@pexa.com.au or brand@urbis.com.au.
