Net interstate migration to QLD has historically been a key driver of population growth, supporting demand of various property assets. Over the past decade, a net estimate of nearly 150,0001 people relocated to QLD from interstate, representing 18% of QLD’s population growth.
Regional internal migration estimates for September 2020 has revealed that over the past 3 years, QLD has been the preferred destination for internal migration in Australia. Even better, the annual regional migration to QLD has reached the highest level since March 2006 with a net total of 27,115 interstate residents packing their bags and relocating to QLD for the year to September 2020.
The ABS data shows that for the year to September 2020, regional QLD2 welcomed a net of 14,101 people from interstate, outperforming the number of people arriving to Greater Brisbane of 13,014 over the same period.
The pandemic has redefined the way people live, work, study and socialise around the world. The various measures implemented globally and in Australia to contain the pandemic has not generally followed the pre-pandemic typical way of living. This new norm of life has caused our international borders to close since early 2020, and we expect closures will remain in place until late 2021 or early 2022. Even when they reopen a number of containment measures will most likely be put in place for overseas arrivals, potentially impacting on the speed of the recovery of overseas migration to Australia. Within this context, the solid net internal migration to QLD represents a competitive advantage for the sunshine state and sets up the pillars for economic recovery and for demand growth of the residential and commercial property over the years ahead.
According to the Federal Budget Strategy and Outlook 2020/21, net interstate migration to QLD is expected to hold firm until the year 2022/23, reaching an annual average of 21,500 residents over the next four years. The recent regional migration data reveals that the Budget estimates may have fallen slightly short of expectations with respect to the preference of Australians to relocate to QLD.
Looking at the impact of net interstate migration on the different property asset classes, we have witnessed a resilient performance of the industrial and residential sectors in 2020; and this trend is expected to continue in 2021 with the need to fulfil residential supply for an increasing population. A larger population also triggers a multiplier effect on consumer spending that under the current OMNI retail trends underpins demand growth of industrial space. According to the latest Colliers’ Industrial Research and Forecast Report, for every one billion AUD spent on online sales, approximately 85,000 sqm of warehouse space is needed which is three times the amount of warehouse space required for traditional brick-and-mortar sales. Based on the increase in online retail sales of A$12 billion in 2020, we estimate an increase in industrial demand across the country in the vicinity of ~1,020,000 sqm. Under this context, the QLD industrial property market has already been a beneficiary of this trend, with new industrial development supply (over 5,000 sqm) exceeding 410,000 sqm p.a. since 2019 and sitting well-above the annual long-term average of 299,000 sqm.
The QLD industrial investment market has also capitalised from strong interstate migration, reaching A$1.3 billion in sale volumes (over A$10 million) in 2020. Prime grade yield compression of nearly 50 basis points even during a pandemic year has demonstrated the consolidation of QLD industrial property as a defensive investment offering. We expect to see increasing interest from institutional investors on regional industrial assets (outside the capital city) as internal migration to regional areas has regained its position as a preferred destination for interstate and intrastate migrants.
Housing affordability remains as one of the key drivers of internal migration to QLD, with over 55% of net interstate migration relocating from NSW. According to CoreLogic’s Home Value Index for January 2021, the median dwelling value in Brisbane is over A$350,000 more affordable compared to Sydney and nearly A$165,000 more affordable compared to Melbourne. Furthermore, over the year to January 2021, QLD regional housing values have surged 7.7% higher while Brisbane housing values increased 4%, with the latest outperforming the growth seen across the largest capital cities over the same period. We expect the resilience of the QLD residential sector will be supported by the extension of the HomeBuilder assistance package until March 2021, while mature buyers relocating from Sydney and Melbourne are expected to drive residential property demand in regional areas given the lifestyle and affordability benefits.
The QLD Government population projections 2018 edition (medium series) estimates that the state population will reach 7.1 million by 2041, increasing from 5.1 million residents in June 2019. Based on the forecast population growth, Colliers Research forecasts that the sunshine state will require to build circa 796,000 new residential dwellings until 2041 (or the equivalent to about 36,000 new dwellings annually) to be able to accommodate the forecast growing population. This represents a significant expansion of the state in the magnitude of about 40% of the number of private dwellings (a comparison based on the 2016 Census data).
Supported by the growing population, retail activity is expected to hold steady in QLD particularly for neighbourhood retail centres and specific LFR centres with a focus on fast food, home improvement, renovation, construction, and technology. In 2020, investment sales over A$5 million of QLD neighbourhood shopping centres accounted for about 35% of the state’s annual retail investment volumes. Similar to global and national trends, other type of retail centres may continue to experience changes in the way business is conducted with an increasing omni-channel retail focus and conversion to mixed-use assets.
Demand for office accommodation across the sunshine state is expected to recover gradually over the next 2 years, mainly supported by the growth in base office demand from the public sector and from companies offering social services (healthcare and education) to the growing population. Our analysis of Deloitte Access Economics employment forecasts for September 2020 has revealed that white-collar employment in the sunshine state will recover in 2021, driven by white-collar employment growth in regional areas and outer Brisbane areas. The recovery of white-collar employment and base office demand in the Brisbane CBD and near Brisbane city region will consolidate in 2022 as the city continues to go through its renewal process.
The outlook of the QLD property market remains promising and well supported by consistent net interstate migration, housing affordability and a solid infrastructure program expanding from the capital city to regional areas.
1 Net calculation of a total of 951,046 arrivals and 802,153 departures.
2 Regional Qld includes all regions outside Greater Brisbane.