The pandemic has resulted in the outer suburbs bias among many homebuyers, but this trend seems to be dissipating as the market enters a post-COVID phase.
A study by PEXA and Urbis showed the demand trend in three largest capital city markets: Sydney, Melbourne, and Brisbane.
A highlight of the report was a clear trend of consumers migrating to outer suburbia at the onset of the pandemic as they seek more space and embrace new working from home arrangements.
This trend, however, recently reversed, as hybrid working has been introduced more widely and more Australian workers are heading back into the office.
Urbis housing sector lead Mark Dawson the pandemic turned the housing markets inside-out.
“The more time locked inside, the more people moved out — now they are turning outside-in as those drivers have been reversed – and tenants are rushing back to inner areas,” he said.
PEXA head of research Mike Gill said 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,” he said.
Here are the recently observed trends across each of the three biggest markets:
Demand for 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 on a yearly basis.
Meanwhile, inner and middle ring settlements have held steady since July 2020.
A similar trend was identified in Melbourne, with outer ring settlements increasing 18.5% in FY21 when compared to the previous 12 months, only to slow down with a growth of 8% over FY22.
Meanwhile, inner ring settlements dipped 5.7% in FY21, but bounced back by 5.6% in FY22, recovering from the impact of restrictions at the onset of the pandemic, such as border closures.
Melbourne’s 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 was the only capital city to have growth in all segments across both financial years.
Inner ring settlements grew 58.6% in FY21 and a further 35.9% in FY22, middle ring settlements were up 79.2% and an additional +9.5% over the period.
Meanwhile, outer ring settlements lifted 42.1% in FY21 and 12.5% in FY22.
Mr Gill said it is clear to see why this market has been the best performing state nationally for settlement volumes.
“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,” he said.
“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.”
Photo by Alena Darmel from Pexels.