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Thursday, 26 March 2015

Sydneysiders stop leaving Sydney


Commentary on demographics and property is a nightmare to read sometimes! Par example...

(i) "Sydney is building a massive oversupply of property...".


Why must commentary swing wildly from one extreme viewpoint to another based upon one quarter of figures (which is rarely a good idea with ABS data at the best of times)?

Last quarter population growth in New South Wales slowed because, well, it always slows in Q2.

Not because house prices are too expensive. Not because everyone is suddenly moving to Queensland (?). But because migration into Sydney is lower in the June quarter. We have 25 years of data to show that. I was a one-time migrant to Sydney myself years ago - you never migrate to Sydney in Q2!

I have charted below the 10 year population growth versus dwelling completions data for New South Wales which should tell us whether or not we need to be alarmed.

OK, we have one strong year of commencements underway - we might just about get up to ~50,000 New South Wales dwelling commencements with a following wind when the December figures are released.

But just take a look at what's been happening with dwelling completions since 2006...yikes! It is nonsense to claim that there is an oversupply of property in Sydney.

Now sure I wouldn't recommend buying an off-the-plan unit in one of the few pockets of Sydney oversupply right now. But then, I wouldn't recommend doing that any time, so that's nothing new. 

(ii) "Everyone's stopped having babies due to housing affordability..."


In the year to September 2013 there was an all-time record high number of births at 312,200. In the past 12 months to September 2014 the number has been almost as strong at 303,000. I may or may not have even contributed one birth that number myself (well, not directly, but y'know what I mean).

We have never before in Australia's history seen more than 615,000 babies born in the space of two years, and we clearly haven't stopped having babies due to housing affordability. Quite the opposite, it's a baby boom!

(iii) "Adelaide is going to have a house price boom because it's cheaper than Sydney..."


South Australia hasn't added a single job on a net basis for more than half a decade (and, just to re-cap, dwelling prices tend to rise when strong demand is outstripping supply). 

With no jobs growth at all in evidence, net overseas migration into South Australia is likely to dry up fairly sharpish, while there is already a negative impact of net interstate migration from South Australia aka. a "brain drain" to other states with superior employment opportunities.

I'm not sure how one concocts a property boom out of that.

Demographics Q3 released

Meanwhile, back in the real world, the ABS released its Demographic Statistics for the September 2014 quarter. The Aussie population continued to increase strongly to a new high of 23,581,029 as at 30 September 2014.

Natural population increase continues to do what it does (sadly, more of us dropped off the perch to offset the baby boom - the circle of life...), but as I have noted previously from the Overseas Arrivals and Departures figures, net overseas migration is now entrenched in a downturn phase.

A total of +203,900 people migrated into Australia in the year to September 2014, which is still a historically strong figure but well off the peak of more than +315,700 seen back in December 2008.

The net result was a population increase of +90,293 in the September quarter, which of course is much stronger than the seasonally weak Q2 2014 figure of +68,246, but is also 10 per cent lower than the prior comparative period.

Over the year to September 2014 the total population increase was a massive +354,605, although this is now the softest annual result since the December 2011 quarter.

Immigration slowing in mining states

More interestingly, let's take a look at the state by state figures. Unsurprisingly net overseas migration slowed by 28 per cent in South Australia year-on-year - although annualised net overseas migration remains in positive territory, net immigration is now tailing off in South Australia due to a dearth of new employment opportunities.

In fact, net overseas migration slowed across the board, and this has been particularly the case in the mining states.

Sydneysiders have stopped leaving

The game-changer is the net interstate migration data. The Sydney housing market has just about functioned over the years because typically tens of thousands of people have departed the state each year for cheaper and sunnier climes. Well, not any more! 

Net interstate migration from New South Wales has declined to the lowest level on record, and based upon this quarter's data is set to continue declining yet further.

On a net basis fewer and fewer people are departing Sydney and Melbourne, where they feel relatively secure in their jobs, which is inarguably adding ever greater pressure to inner suburban property prices in the two largest cities.

Annualised net interstate migration into Queensland bounced a little to +5,942. Balancing the ledger, net interstate migration remained sharply negative in South Australia, and has now also been negative for two consecutive quarters in Western Australia, which is some turnaround from the heady days at the peak of the mining boom.

I expect to see net interstate migration into Queensland remain in positive territory as Brisbane continues to add jobs and folk seek a cheaper and sunnier lifestyle in the Sunshine State.

New South Wales leads population growth

Finally adding in the impact of natural population increase - births and deaths - the strongest total population growth was unsurprisingly seen in New South Wales (+106,400) and Victoria (+102,000) - the impact of fewer residents opting to leave the two most populous cities being evident.

Population growth remains substantial but is slowing in the resources influenced states of Queensland (+69,400) and Western Australia (+53,700).

However, as detailed here recently, jobs growth in the capital cities of Brisbane and Perth has done very well to date to offset declining employment in struggling regional towns and cities, particularly in the resources sector.

Population growth remains relatively weak in absolute terms in South Australia (+14,300), Tasmania (+1,600), the Northern Territory (+2,800) and the Australian Capital Territory (+4,400).

The long run data shows how heavily focussed population growth has been upon the four most populous states, and most notably the four capital cities therein. 

Over the past 10 years there has been massive population growth in New South Wales (+884,000), Victoria (+923,000), Queensland (+891,000) and Western Australia (+602,000).

Population growth in New South Wales is imperiously strong, now tracking at some 17 per cent above its decade average.