Population Movement Driving Property Growth in Regional Cities
Where to invest in property in Melbourne
Melbourne’s nation-leading population boom has been a popular property and economic narrative over the past five years, with an explosion of key sectors such as tertiary education, allied medical services, services industries driving migration and a global push towards the service-sector economy.
This is creating a multitude of new employment opportunities that enhance population mobility. As new economic challenges such as growing housing affordability create new drivers of movement among Melbourne’s workers and residents, Victoria’s regional cities are playing an increasingly important role in supporting new population growth, property movement and economic growth.
Melbourne’s population expansion has charged ahead growing at 2.2% per year over the past decade, but alongside this massive metropolitan population boom have been under-stated and under-examined growth in Victoria’s three largest regional cities.
Regional Victoria is now the strongest market in Australian Real Estate with the strongest price growth across the nation
This is on the back of strong population growth, new employment opportunities, affordability, lifestyle and increased demand for homes to own or rent.
Behind the Melbourne-centric economic narrative, Victoria’s three largest regional cities – namely Geelong, Ballarat and Bendigo – have achieved growth rates above or equal to Sydney over the past decade. Ballarat’s population growth during the decade from 2006-2016 averaged 1.8% per year, while Geelong and Bendigo both matched Sydney at 1.7% per year. Cumulatively, the three regional cities contributed population growth of 71,074 residents during the past decade – equivalent to 6.4% of Victoria’s entire population growth – but accounted for 46.3% of Victoria’s entire regional population growth (excluding Metropolitan Melbourne).
This indicates that the largest share and volume of new residents to Victoria are continuing to locate in metropolitan Melbourne, but also indicates that these three key regional cities are continuing to develop as regional hubs for growth and present opportunities for savvy property investors to capitalise on an under-analysed and an under-speculated residential property market.
State Government population projections (Victoria In Future 2016, DELWP) indicate that during the 40 years between 2011 and 2051, Regional Victoria (excluding Greater Melbourne) will continue to grow by approximately 700,000 new residents. The same forecasts suggest that Geelong, Ballarat, Werribee and Bendigo will account for 44% of future regional growth, equivalent to approximately 308,000 new residents and creating demand for 118,000 new dwellings. Another emerging satellite city emerging to the north west of Melbourne is fast growing Mickleham establishing a live work and play emerging city
This is notable for two key reasons:
Where population growth occurs, residential property demand follows, regional cities will continue to emerge as clusters and activity hubs by design where people will want to live, work and play. These satellite cities will increasingly achieve growth in size, scale, investment and population.
From a property perspective, house prices have already demonstrated a fairly long and stable period of upward growth that hasn’t reached the lofty heights of Melbourne’s market but demonstrates a stable, investor-friendly market that remains affordable in comparison to Melbourne.
For the cash-out market (empty nesters & downsizers) and the price-sensitive (young families and first-home buyers), the regional city markets with access to Melbourne via road and rail offer a highly competitive housing market entry point with a ‘tree change’ lifestyle.
The 2017 median price for Ballarat and Bendigo was $320,000 and $325,000 respectively, while Geelong was more comparable with Melbourne metro greenfield fronts (such as Werribee, Wyndham and Melton) at approximately $450,000.
Over the past decade, the median house price in Ballarat and Bendigo increased by $120,000 or approximately 4.9% average annual growth per year. Geelong sat slightly above with a 10-year value uplift of $173,000 and grew more quickly at 5.5% average annual growth per year.
Given strong forecasts for regional population growth a continued need to create new residential lots and dwellings to facilitate this growth is evident. There are strong opportunities for both property buyers and property proponents to engage in regional markets and diversify out of highly congested, fluctuating Melbourne markets.
A key driver of migration is access to employment. Unemployment rates in Ballarat (4.2%), Bendigo (7.1%) and Geelong (6.4%) were all below the 9% unemployment rate recorded in the Western Melbourne region including Wyndham, Mickleham and Melton in 2018.
Analysis of migration data from the 2011 and 2016 Census paints a picture of Melbourne’s inter-relationship with growth in regional cities. Residents transitioning from Melbourne to a regional city accounted for roughly 9.1% of total net migration to Geelong, Ballarat and Bendigo – but in real terms, outward migration from Melbourne equated to over 20,737 residents moving into a regional city.
Based on average household sizes (2.6 people per dwelling for Victoria), this equates to mobility amongst just under 8,000 households or dwellings and indicates the volume of potential residential property action associated with this small but growing buyer cohort.
Melbourne’s significance as a stepping-stone for regional migration can be summarised via the proportion of total net migration for each regional city relative to the number of new residents that moved from a Melbourne metro municipality.
The standout city was Geelong, in which 28.6% of total net migration originated from Melbourne; indicating that over 1-in-4 new residents came from Melbourne.
Ballarat and Bendigo had lower shares of 14.4% and 13.1% respectively, but are expected to follow a similar trajectory to Geelong as residential capacity in Melbourne’s greenfield areas and affordability issues continue to prompt population mobility.
As a result, Bendigo, Ballarat, Geelong, Werribee and Mickleham are well positioned to continue to grow creating ongoing and sustained residential property demand. We also note that to a large extent, land within Melbourne’s Urban Growth Boundary has been land-banked by major developers, resulting in supply constraints and a lack of opportunities for developers who may have missed the boat. There are opportunities within the regional cities to access larger, cheaper residential development sites but from MacroPlan’s internal project experience, developer interest in site selection and opportunity analysis undertaken for major regional centres with rail and highway access to Melbourne is continuing to grow. There is a window of opportunity to capitalise on Victoria’s long-term positive economic trajectory, but the boat isn’t waiting for stragglers.
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