Queensland state could be in the cusp of of a major lift in interstate migration from New South Wales and Victoria over the next few years and this could in effect take the heat of Sydney and Melbourne house prices, according to Macquarie Research.
Queensland could potentially receive an additional 20,000 to 25,000 interstate migrants annually over the next 2-4 years, which could to start with address the oversupply in housing in the state and eventually take the pressure of Sydney and Melbourne homes, said Macquarie.
The debate over housing affordability has intensified in recent months as Sydney and Melbourne home prices have surged non-stop for almost five years now. That has pushed up household debt to unprecedented levels, adding to regulator concerns and political pressure for governments to address it.
“A pickup in net interstate migration may kill two birds with one stone,” for the central bank and the banking regulator, Macquarie said. “Periods of net interstate migration outflows from NSW and Victoria have historically, been associated with a stabilisation of real house prices in Sydney and Melbourne.”
Macquarie premise is based on the relatively lower house prices in Queensland, rising job prospects and infrastructure development in the state.
Queensland’s employment prospects have been improving, judging by the lift in the Seek job ads index since the middle of 2016. That comes as Sydney jobs growth has stalled, Macquarie said.
Sydney and Melbourne house prices have risen to relatively “extreme” levels relative to Brisbane, Macquarie said. It estimates the current median Sydney house price is 2.2 times the median Brisbane house price, with the median Melbourne price more than 1.5 times.
“Current house price multiples have not been sustained for long periods, with previous instances sparking multi-year reversals.”
The reversals in 1989 to 1992 and 2002 to 2008 were driven by both a lift in Brisbane prices, and a period of relative “Stabilisation” of house prices in Sydney and Melbourne, it said.
The Reserve Bank of Australia governor Philip Lowe signalled that soaring house prices may be holding the central bank from cutting rates further to stimulate the economy. The RBA reduced rates twice last year in August and October.
Australian capital city home values climbed 1.4% in February, taking the annual growth rate to 11.7%, the highest since the 12 months to June 2010, according to data from research firm CoreLogic. Sydney home prices have surged 75% in less than five years and dwelling prices are almost 8.5 times higher than gross household incomes in Sydney.
The second most expensive capital city, Melbourne, has a dwelling price-to-income ratio of 7.1. Melbourne home values climbed 1.5% in February taking gains since January 2009 to 88%.