ABS data confirms a city exodus during COVID, with biggest internal migration loss on record

It’s official. Australia’s capital cities really have been losing people in record numbers during COVID. But will tree changers stay put in the country, or flock back to the big smoke?

Provisional internal migration data from the Australian Bureau of Statistics shows the nation’s capital cities had a net loss of 11,200 people during July, August and September last year.

That was the largest quarterly net loss since records began in 2001.

Internal migration is the movement of people across a specified boundary within Australia involving a change in their place of usual residence. This can be within a state or territory, or even within a city.

The ABS said the net loss in the September quarter was the result of both fewer arrivals into capital cities (-10.6pc) and more departures from big centres to non-capital city areas (+1.2pc).

The September quarter coincided with the months after Australia’s first hard COVID lockdown, when some city dwellers were starting to pack up for the country and real estate agents began reporting a rise in demand for homes in regional Australia.

It also coincided with the start of Melbourne’s second extended lockdown, when borders were closed to Victoria.

Sydney experienced the biggest loss of people during the September quarter, however, the data shows this trend had been happening to some extent even before the pandemic.

Meanwhile, the exodus from Melbourne increased by a factor of eight compared to the pre-lockdown period.

Some capital cities did make gains, however.

Brisbane and Perth saw an increase in internal migrations, while Hobart, Perth, Darwin and Adelaide were relatively steady.

In net terms, NSW gained the most people from Victoria, and lost most to Queensland.

Locked down with closed borders for much of that period, Victoria in net terms did not gain people from any state or territory during the September quarter, with the largest proportion of those leaving choosing to head north to Queensland.

And after years of losing people at the end of its gas boom, Darwin saw its first net gain from internal migration since 2015.

Why did people leave big cities during the September quarter?

After enduring one lockdown, Ellie Bonnett left Melbourne for regional Victoria in August 2020.

Her job in human resources had gone from a Melbourne-based office to permanently working from home, which allowed her to relocate to Daylesford and buy a home for the first time.

As well as allowing her to live a quieter lifestyle, the move also allowed her to buy a bigger property than she would have ever dreamed of purchasing in Melbourne.

“I wanted to embrace the situation we’re in with COVID and move to Daylesford,” she said.

Ms Bonnett said she had embraced the small and “welcoming” town, despite the difficulties of making friends in regional Victoria at a time when the pandemic was still ongoing and social events were limited.

“I ended up meeting my neighbours via video conferencing,” she said.

Ms Bonnett said she had an element of “FOMO” when Melbourne started to open back up again, but that she did not regret her move.

She has so embraced the remote-working lifestyle, that she is now set to rent out her Daylesford property, and hit the road in a caravan to travel Australia while working on her laptop.

“I expect to spend a lot of my time in Byron,” she said.

“If I could be in all the places at once, I’d be in Daylesford and on the road. I have no regrets buying there. I’m so proud of the community.

“But I now see a lot of value of being on the road and trying to surf as much as possible. Being free to move with the COVID landscape.”

Ms Bonnett does not see herself moving back to a big city any time soon. But she said she would be keeping her options open.

What is this doing to regional house prices?

Daylesford house prices were already rising when Ms Bonnett moved to the town.

As the pandemic drags on, data by CoreLogic is now showing that house prices in regional Australia are overall rising at a much faster rate than capital cities.

Regional areas recorded an average 1.6 per cent increase last month, and were up 7.9 per cent over the year, while the combined capitals rose only 1.7 per cent over the past year.

As well as a desire for a working-from-home sea change, the cost of housing in Sydney and Melbourne is potentially also a factor behind why people are leaving the big cities for the regions.

The last noticeable wave of regional migration was back in 2017-2018, when property prices were hitting new peaks in both cities.

Coastal regions have been in particularly hot demand during Australia’s COVID summer, with this even creating precarious situations for renters, as some markets experience housing shortages.

If price trends continue, it could become less affordable for people to contemplate a regional migration.

CoreLogic’s research director, Tim Lawless, said the divergence between metro and regional housing demand in NSW and Victoria was more substantial than in other states.

“Internal migration data shows more people are leaving Sydney and Melbourne for regional areas, resulting in a transition of activity from the metro regions to the outer fringe and regional markets,” he said.

“This demographic trend is further compounded by the demand shock of stalled overseas migration.

“As Melbourne and Sydney historically receive the vast majority of overseas migrants, these metro areas have been the hardest hit by this demand shock.”

Will the regional migration trend continue long term?

ANU demographer, Liz Allen, expects the trend to be “short lived”.

“Sydney and Melbourne have experienced the greatest [COVID lockdowns] and necessary behavioural change, so it’s not at all surprisingly that people have been moving out and away from these restrictions and into other areas,” she said.

“The trend we’re seeing at present is the result of others not moving into the areas where people have left, which would ordinarily happen.

“I expect this trend of net excess movements away from capital cities will be short lived.”

She believed this was because some people may migrate to the regions and then realise “the infrastructure is woefully inadequate” in some places compared to big cities.

“Queensland has been an attractive place to move to from elsewhere within Australia, even before COVID,” she said.

She also believed the trend could be stymied as employers start asking their workers to come back into the office.

Some major corporates are starting to ask workers to come back on a part-time basis. In Victoria, after its hard second lockdown, the State Government has just announced workforce capacity can return to 75 per cent.

“With a greater push for workers to return to physical offices, the opportunities for living in regional areas will be constrained,” Ms Allen said.