From proposed international student caps to a national target of 1.2 million new homes over 5 years, tackling our housing crisis is a priority for governments Australia-wide. While it will take time for action to translate into more housing supply, and less demand, the housing crisis has already changed the lives of many Australians. Take Sydney, for example, where expensive housing may already have locked out a generation from accessing economic opportunity.
In the past two years, Sydney has seen its largest rates of domestic out-migration in over 20 years. These rates are much larger than the exodus we saw during the pandemic. In fact, absent of net overseas migration, Sydney should be shrinking.
So why are people so eager to leave Sydney? When I looked into the types of people who decide to leave Sydney and where they decide to go, I found one consistent pattern: People in their 30s are the most common demographic to leave, with their destination of choice being coastal NSW and south-east Queensland.
Why these coastal areas? Housing costs are lower. Specifically, it is much cheaper to purchase a property.
In fact, looking at the 2021 Census, when I take any pair of locations, I find a strong negative correlation between the ratio of house prices and the direction of people flows for 30- to 39-year-olds. Simply, people in their 30s tend to move towards areas where housing prices were cheaper in 2016.
While cheaper housing seems to be a strong predictor of migration flows, what reasons do people themselves give for moving under the guise of anonymity? Let’s check out the anonymous internet forum, Reddit. While there are people of all ages that use Reddit, it is typically frequented by people in their 20s and 30s. Specifically, I looked at conversations that focused on moving between Australian urban and regional areas since the pandemic, and I aggregated common words and phrases that people used.
The two main reasons people give are: to enter the housing market for the first time, or to reduce their current mortgage repayments. Many people expressed the sentiment that the level of house prices in Sydney were making other aspects of their life unsustainable. For those moving, the decision to do so is often associated with being able to pay off other debts or take a lower-paying job that provides greater leisure time.
Given the focus on buying a house or paying a mortgage, it is no surprise that these migration patterns are especially strong for millennials.
What about other age groups? Most interestingly, when I looked at younger groups – those who are more likely to rent – I saw the opposite pattern. People in their 20s move towards places where houses are more expensive.
Why do Gen Z want to live in expensive areas? Some people, perhaps even skeptical parents of Gen Z, may argue that the brunch spots are better in the inner city than in the regions. As a member of Gen Z, I too am guilty of over-paying for avocado toast but there’s more to the story than brunch!
It is worth remembering why people generally pay more to be in the city to begin with. If engaging with urban economics has taught me anything, cities are great at facilitating access. Access to schools, shops, hospitals, child care, social connections and specialist jobs.
Should policymakers be worried about the Sydney millennial exodus? The simple answer is yes.
Young people will continue to leave Sydney, lest they come from significant familial wealth. This demographic shift has future ramifications beyond people being unable to see the grandkids as often. Cities are important breeding grounds for career development, and younger generations may permanently miss these key formative experiences. At the same time, they also bring an inimitable level of dynamism to a city’s economy. Young people are more likely to work in innovative start-ups and provide the backbone of many essential services.
Upcoming research at e61 will be digging deeper into this issue, so stay tuned. But right now, one thing is clear: expensive housing in urban areas in Sydney is giving millennials little choice in the matter of where to live. Simply put, young people are being pushed into the periphery of the hubs of economic activity.
