The relationship between the labour force and the housing market
WE investigate the linkage between growth in employment and growth in home values across the capital city housing markets
Being employed is often a key determinant to owning a home. Yes it is an obvious statement but it is a fact that is often forgotten about. It is common belief that low interest rates have been the key driver of the recent growth in home values however, growth in values has been narrowly based whereas interest rates are the same across the country. Given this there is clearly more to current housing conditions than low interest rates and employment is a key driver.
During 2008, combined capital city home values fell by -6.1% from March to December. Spurred by aggressive cuts to interest rates and stimulus in the form of the First Home Owners Grant Boost, combined capital city home values started to rise thereafter. While values increased, Sydney and Melbourne have consistently recorded the strongest value growth while for brief periods Perth, Canberra and Darwin have also seen quite strong levels of value growth. Given the dramatically different capital growth performances it is clear that it is not all due to low interest rates.
Cumulative change in capital city home values, Dec-08 to Sep-15
Between December 2008 and September 2015, the majority of employment growth has taken place in Sydney and Melbourne. If we look at employment growth across the capital cities and territories, more than two thirds (66.9%) of employment growth has taken place in Sydney and Melbourne. Importantly a larger proportion of total full-time jobs growth (74.2%) has taken place in Sydney and Melbourne than part-time jobs growth at 61.8%.
Cumulative change in capital city and territory employment, Dec-08 to Sep-15
Since 2008, the NT was the only region in which the rate of growth for full-time employment has been greater than growth in part-time employment. Although the rate of full-time jobs growth was lower in Sydney, it along with the NT have been the only two regions that have recorded a greater total increase in full-time employment than part-time employment since the end of 2008. It is an obvious statement but full-time employment growth would seem to be more important than part-time as it means the employee is working more and in most cases earning more money which is in-turn more conducive to home ownership.
Over the 12 months to September 2015, Sydney and Melbourne have continued to create the greatest proportion of jobs. There has also been somewhat of a reversal of fortunes for the remaining regions. Full-time employment growth has more recently ramped up in Brisbane and Hobart, while Adelaide has continued to shed full-time jobs while there were also fewer full-time jobs available in Perth and the ACT. Over the past year, 24,713 full-time jobs have been created in Brisbane compared to 26,036 since 2008. Similarly in Hobart there has been 3,331 full-time jobs created over the past year compared to full-time job losses of -4,347 since 2008.
Total change in employment, 12 months to Sep-15
While job creation isn’t necessarily the be all and end all of housing demand it is an important component to consider. It certainly goes some way to explaining why home value growth has been much stronger in Sydney and Melbourne over recent years than in other cities. The recent relative strength in job creation in Brisbane and Hobart may signal increasing housing demand in those cities over the coming year.