Regional markets dominate sales volume growth in 2020 as Millennial reshuffle changes property landscape

Despite economic uncertainty throughout 2020, Australians confidently embraced the housing market, pushing sales volumes beyond even 2019 levels — with Millennials leading the charge.

Cameron Kusher, director of economic research at REA Group said despite all the challenges of 2020, the overall volume of residential sales was 9.6 per cent higher in 2020 than in 2019.

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“While both capital cities (10 per cent) and regional markets (20.3 per cent) recorded increases in sales, the stronger lift in regional sales volumes confirms the very high regional search activity we were tracking on realestate.com.au resulted in an increasing number of people making the move out of capital cities,” he said.

“Western Australia saw the biggest lift in sales over the year (30.2 per cent) with large increases in both Perth at 23.4 per cent and regional Western Australia at 50.7 per cent,” Mr Kusher added.

“The areas with the largest increases in sales over the year were dominated by regional markets and outer capital city areas, highlighting a shift in population perhaps driven by the prevalence of working from home and lifestyle changes,” he said.

Simon Kuestenmacher, co-founder and director of research at The Demographics Group, said when trying to understand why the Australian property market behaved the way it has during the pandemic, we should remember that there is no single market.

“There are separate markets. The simple story is that the apartment market has been tested because we had quite a large number of properties enter the market (which made sense before COVID-19 because we were expecting high population growth) but that hasn’t happened. So that was a problem for units and the specific localities where they’re found,” he said.

Unsurprisingly, realestate.com.au figures showed that the largest declines in sales volumes were in inner Melbourne, followed by other inner capital city markets.

“That said, even if we were to take COVID off the table, for now the single biggest driving force behind property in the 2020s really hasn’t changed; and that’s the millennial generation finally reaching family formation stage,” he said.

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Mr Kuestenmacher said that Millennials, or Generation Y, are defined as people born between 1982 and 1991 who are now the largest population group. There are approximately 6.8 million Millennials living in Australia today, many of whom have been occupying the inner suburbs of capital cities.

“That’s where they have been living, in one- and two-bedroom dwellings. All of a sudden, you add another little human and all the stuff that they need. And now, probably because this is the generation of the knowledge worker, one or two of these partners have been working from home during the pandemic,” he said.

“Suddenly this is a generation that at scale needs more space, needs at least three bedrooms in their home. So it becomes a reshuffling of the millennial generation, and they of course they are moving to where the large family-sized homes are available. And this is suburbia, or the regional cities,” Mr Kuestenmacher said.

“This is why we’re seeing a big shift towards regional Australia for the first time in a long time. That’s why we’re talking about such strong growth figures as a whole. So these sales numbers make sense.”

He added that such solid sales volume in the residential market, despite a global health pandemic, also proved that Australians are “remarkably confident” in the housing market.

“They kind of have to be as young families, because they’re now settling for at least the next 20 years. That’s what Millennials are looking for right now, they want to replicate the upbringing they had. As a group they had a very privileged upbringing in large suburban homes. Now they want to provide the same amenities, or luxuries, to their kids. We don’t even need to look at COVID to understand the reasons why they move,” he said.

Mr Kuestenmacher said he predicted that confidence will even eventually return to Australia’s inner city apartment markets when our international borders open.

“In Australia, we are very critical of how COVID has been managed by our government, but if we look at the caseload internationally, we’ve done extremely well. So if I’m a skilled migrant or international student who is looking at the world, and can literally pick whatever location to move to, then Australia looks very promising. And as a result, this will have literal applications for the housing market,” he said.

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