Issue 16 | August 3rd, 2017 | Is Interstate Migration Boosting Property Prices?
Already one month into the second half of the year, reminding us we only have 5 months to go until 2018. The weather here on the Gold Coast has been breathtaking and it is no wonder that the Gold Coast is officially rated by the United Nations as one of the five perfect climates of the world.
THE FIVE FUNDAMENTALS: UNEMPLOYMENT
I trust you will recall how I have highlighted on many occasions that there are five fundamentals that drive the real estate market; GDP which we refer to as the economy, population growth, unemployment, interest rates and housing affordability. I touched in our last report on how the economy is still performing as one of the best economies in the world. I know, it doesn’t always feel that way but you can picture how bad so many others are. I have also touched many times on interest rates and the fact they still sit at record lows for Australia and that this can’t continue forever. It is good to be able to shift from those two major fundamentals and look at another, namely unemployment, playing an equally important role in supporting the property market.
The Australian Bureau of Statistics recently released figures showing the most dramatic three-month surge in job creation in 12 years, and it has led to speculation that the long post-boom era of sluggish wage growth will eventually near its end.
The national jobless rate fell unexpectedly from 5.7% to 5.5% in May, and it is the lowest unemployment since March 2013. Amongst the figures was an impressive 52,000 job search in full-time work in that month.
WHAT ARE THE SIGNIFICANT FACTORS?
There are some real significant factors that are likely to roll off the back of this figure. First and foremost, you can pretty well be certain there will be no more interest rate falls and it means we are moving faster to increases in interest rates. It will only be an international crisis that would have it otherwise. These figures also suggest that we can expect wages growth, as unemployment below 5% is pretty much considered full employment as there is always a percentage of people who simply do not want to be employed.
These latest figures show that the labor market was nearing a point at which an oversupply of workers looking for jobs haltered the decline in wages growth. Officials calculated the so-called non-accelerating inflation rate of unemployment, which was now at 5% compared to around 6% in early 2000. This suggests that the unemployment rate is only .5% above the theoretical level at which it begins to generate inflation as companies are forced to pay more for workers.
Now, these figures jump around a bit and can be adjusted going forward, however they are consistent with the National Australian Bank’s monthly employment survey, an indication by employers which currently shows they expect to employ more people. A lot more information in these figures such as total hours worked rose by 1.9% in the month and the so-called under utilization rate dropped .4%. Since February, total employment rose by 141,000, the biggest three month gain since late 2004.
An ex-Reserve Bank Board Member, Professor McKibbin, who is now at the Australian National University, said there were more signs that companies had started to invest again, even in the mining sector. This truly is a very important step going forward. We can expect to see more encouraging figures on unemployment moving forward.
INTERSTATE MIGRATION & PROPERTY PRICES
Changing pace. I know I have touched a number of times on interstate migration and gave you my views subject to what we are seeing as the largest real estate company on the Coast, and indeed the largest rental providers. I was waiting for official figures to come through and at last, I have some from the Australian Bureau of Statistics. It shows that over the 2015/16 Financial Year the net internal arrival to the Gold Coast was 6,426 people. This number is the highest on record and 39.4% higher over the previous year. Without diversifying too much, it is interesting to note that of the top 25 regions for migration growth in Australia, 13 were located in areas either adjacent or close to capital cities, but where there was a mix of sea change and tree change locations. This fully supports the strong price rises being recorded across many parts of Australia’s coastal and hinterland regions, and of course especially in close proximity to a capital city. Conversely, it is interesting to note that the areas of Australia that are seeing the strongest migration away from them are generally within our 5 major capital cities and predominately because of the high cost of living in those areas.
Well, the above certainly does suggest for those of us who live here on the Gold Coast that we are very, very lucky; one of the five best climates in the world, a robust local economy, and with something really exciting to look forward to as we head towards the April 2018 Commonwealth Games. I guess it is not just us who are identifying that as we see yet again Australians from all over the nation choosing to migrate to this great city more than any other location in the country. It is a pretty strong endorsement.
MUSCULAR DYSTROPHY CHARITY BALL – TICKETS SELLING FAST!
There has been a surge in bookings for our 24th Ray White Surfers Paradise Muscular Dystrophy Ball on the 9th of September following the announcement of Sneaky Sound System as our lead entertainers. Don’t be one of those who heard about how good it was, but come along and be part of this exciting annual event.
Visit the website here for all details: rwspevents.com.au/rwspcharityball
I look forward to catching up with you in a fortnight’s time. Until then, stay safe.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group