How you could move house, buy one the same and still save $400,000
If you own a house in Sydney, this is not a hypothetical question. You could sell your house, move to Adelaide, buy one more or less the same and be over 400 grand better off.
If you already live in Adelaide, there’s still a bonus on offer. You could up stumps and move to Hobart, and pocket almost $80 grand on a similar house. (If you live in Hobart, sorry but you need to move to the bush to find a similar deal.)
The amounts are a little smaller if you own an apartment or townhouse, but you could still pocket a large sum if you move to a cheaper city.
There is a lot of talk about housing affordability in Australia, but this option is little discussed. People talk about moving to the outer suburbs, but nobody ever seems to mention moving interstate.
However, this article is not one of those ones that tells young people “stop whinging and move.” I know that is not a very constructive suggestion.
The reason I raise the point is to ask why it isn’t happening. Why don’t people move to SA? (And let’s be clear on this, they really, really don’t.)
Fewer people are moving to South Australia now than moved there in 1981, even though Australia is more than twice the size now.
It’s not simply because SA is in a tough economic time with the end of the automotive industry. All over the country, interstate migration is amazingly low. Mostly, people want to live where their family and friends live, etc. That explains a fair bit of inertia. But even when you take that into account, interstate migration is surprisingly unpopular.
We used to move interstate a lot more. This graph shows fewer Aussies are moving interstate now than 15 years ago, even though the population of Australia is higher.
(It looks like the mining boom had almost no impact on interstate migration. If anything, that black line goes down during the boom years of 2009-2013.)
Weirdly, Australians are now more likely to move overseas than interstate, as the red line above indicates. When I think about it, more people I know from Melbourne now live in London than Sydney.
Are Aussies less patriotic and more “State-riotic”? Why are we so afraid to move to a state where they might play a different code of football? The difference in average earnings between states isn’t actually that large.
For the comparison of NSW and SA, the difference in weekly earnings is $1541 to $1415. That is equal to $126 a week. Is that really enough to explain the difference in house prices? If you save up the $127 each week it would take 61 years to make up the $400,000 difference in the price of the median house.
It seems so crazy that it is easy to imagine this system must be self-limiting. You imagine there must come a point where people crack and start moving away from cities that, like Sydney, are so expensive. But the lessons of London, Tokyo and New York teach us something else. The difference in prices between the most expensive part of a country and the rest can get seriously enormous.
The RBA is a bit worried about an apartment price correction in Melbourne and Brisbane, but not so much in Sydney. If those Sydney homeowners hang on another few years, they might be able to get a $500,000 bonus from selling up and moving interstate. And that is probably why they never do.