It’s a question I’ve been asked three times in the past week and one that crops up every other week.
The most recent ABS job data shines a light on that argument, especially given the Australian economy added 232,900 jobs in the last 12 months.
While down slightly on the 294,000 jobs added in the 12 months prior, it paints the picture of a strong and resilient economy.
But what really matters is the following:
Ninety-four out of every 100 new jobs were created in just five cities.
- Sydney: +77.2K
- Melbourne: +51.7K
- Brisbane: +40.0K
- Adelaide: +28.8K
- Perth: +21.7K
- Rest of Australia: +13.5K
Side note: more than half of the ‘rest of Australian’ jobs came from regional WA. Most of those roles are effectively linked to Perth anyway given its short commute.
If you attribute those as Perth-related, then:
Ninety-eight out of 100 new Australian jobs trace back to the Big Five.
Jobs drive population growth, population growth drives demand and demand drives rents and values.
If 98% of new jobs are tied to the Big Five capitals, why would an investor choose anywhere else? Especially when the cost advantage of going regional is shrinking year on year.
Take Adelaide for example:
You can still buy a house on land for $600K–$650K in a city generating nearly 30,000 jobs a year.
Compare that with the rest of Australia outside the capital cities, which produced just 13,500 jobs (and a mere 5,300 if you strip out regional WA).
Don’t be fooled by all the ‘hot spot’ articles that come out, like this one and this one.
Even if regional property was cheaper, is it really worth it when you factor in:
- Slower wage growth
- Smaller rental pools
- Lower population inflows
- Higher vacancy risk
- Weaker long-term capital growth drivers
If you could pick up a strong-fundamentals regional property for under $500K, maybe it’s worth a look.
But I have a team trawling Australia for these and I don’t think they exist.
So, the question becomes:
Why take on more risk when the Big Five give you stronger job growth, stronger demand, stronger fundamentals and similar prices?
It’s a risk you don’t need to take.
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