Data available from the Australian Bureau of Statistics (ABS) shows that the majority of Australian’s live in capital cities. As at June 2009, 62.8% of Australian’s lived within a capital city region. These regions account for such a large portion of sales, yet they only occupy around 0.5% of the continent’s overall land mass.
With the majority of Australian’s residing in a capital city, naturally you’d expect also that the majority of dwelling transactions would also occur in these cities. And you would be right. During November 2010, 62.8% of house sales nationally occurred within the capital cities and 77.1% of units sold were within a capital city. Overall, 67%, or approximately two thirds of Australia’s dwelling transactions, occurred within a capital city.
Perhaps most interesting is the fact that although there has been some fluctuation over time the proportions are quite similar to that which was recorded in 1995. As at November 1995, 65.5% of all dwelling sales occurred within the capital cities.
Over time there have been some fluctuations in the proportion of sales between capital city and regional markets where demand for capital city dwellings has risen and fallen. During the 2001/04 national property boom the proportion of capital city sales began to taper. This is when affordability issues began to arise in the market but it was also the time when the ‘sea change’ phenomenon really started to gathered pace.
Retirees and semi-retirees looking to sell their homes within the capital cities and move to coastal regions of the country were one of the primary reasons for an increase in the proportion of regional home sales. A surging resourced sector was also attracting more investment into regional areas of the property market. As property value growth slowed thereafter, the capital city markets once again increased in popularity.
Predictably, Sydney is home to the greatest proportion of overall sales given that it is the country’s most populous city. As at November 2010, Sydney accounted for 25.9% of all sales nationally, or more than one of every four sales. Interestingly, when Sydney and Melbourne sales volumes are combined they account for 43.1% of national sales.
Also of interest is the seasonality of the results. In Sydney, more so than any other city, sales volumes plunge during December and January of each year. Clearly, the real estate market truly does shutdown in Sydney over the Christmas / New Year period.
During November 2010, the five largest capital cities accounted for 63.6% of all sales nationally. Between November 1995 and November 2010 Sydney has averaged 20.6% of all sales nationally on a monthly basis followed by: Melbourne (17.9%), Brisbane (10.3%), Perth (7.1%) and Adelaide (5.5%).
Based on this data, the three largest capital cities have historically accounted for almost 50% of the country’s dwelling sales each month. No wonder so much of the property market analysis is focused on these three cities.
Over time there have been some clear fluctuations in sales volumes amongst the major capital cities.
The proportion of sales began trending lower in 1997 and this continued until 2005. Over this time Sydney witnessed a surge in property values between 2001 and 2004 which saw a deterioration of housing affordability within the city. Sales volumes within the city did not begin to pick up again until 2008 and have been trending higher since.
Sales volumes began trending lower in 2001 and this trend continued until early 2004. Thereafter, volumes have remained fairly consistent however, they recorded a significant fall in 2008. During 2009 and 2010 Melbourne’s overall proportion of sales rebounded however, they are now beginning to fall once more.
Right about the time the proportion of Sydney transactions started trending down, Brisbane’s proportion of transactions started to climb and this continued until late 2003 – clearly the affect of strong interstate migration into Queensland from New South Wales. Following this period, Brisbane’s proportion of transactions fell and have been fairly flat since with a slight increase in 2006/07 and some further falls recently.
The proportion of sales in Adelaide has generally remained fairly consistent over the time period highlighted. As a proportion of national sales, Adelaide has typically accounted for between 4% and 6% of all sales with limited fluctuations.
During the period between 1999 and 2002 Perth’s proportion of national sales fell as the property boom was in full swing, especially in the eastern states. Between 2002 and 2006, Perth’s proportion of overall sales surged at a time when for the most part, value growth was flat nationally whilst Perth values were booming on the back of a strong mining and resources sector. Since 2006, Perth’s proportion of sales has fallen, in-line with the slowdown in value growth within the city.
Overall, capital cities and in particular the larger capital cities, have maintained their popularity over a long period of time. Unlike many other countries Australia’s population is focused within a few areas and this seems unlikely to change any time soon. Capital cities maintain their popularity due primarily to stronger employment prospects (and typically higher wages also), and also due to the ample supply of schools, roads and essential services and a greater overall level of amenity than regional areas.
Tim Lawless is the Director of Property Research at RP Data.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
