Victoria’s population spread

Before the pandemic, most highly sought-after jobs were concentrated in the central business district (CBD) of Melbourne. Victorians were willing to pay a premium to live close to their Collins Street office to shorten their commute. In 2020 and 2021 this all changed, as government stay-at-home instructions during the COVID-19 pandemic meant that most office workers shifted to working from home.

This was no minor change, either. At the height of the lockdowns about half of Melbourne’s workforce worked from home – compared to a mere five per cent prior to the pandemic. Even luddite employers quickly adjusted to the reality of lockdowns and put the digital infrastructure in place for work to continue remotely.

After working remotely for a while, Victorians questioned why they were paying a premium to live close to the CBD. Why not move to cheaper outer suburbs or look for a nice lifestyle town such as Macedon, Daylesford or Castlemaine? Holiday homes on the Mornington Peninsula were increasingly used as the primary residence.

The pandemic wasn’t the only force moving the population. Simple demographics were also at play.

It just so happened that the Millennials (born 1982–1999) had reached the family formation stage of their lifecycle just as the pandemic hit. The hip apartment in Richmond or the share house in Brunswick was exchanged for a home with land on the urban fringe, a place in Geelong, or some acreage near Woodend. Millennials working in knowledge jobs also needed a “Zoom Room” to keep the kids and the cats out of their video calls.

The trend of Millennials leaving the inner suburbs will continue throughout the 2020s as the younger members of the cohort start families of their own. The desired three- and four-bedroom homes aren’t available, let alone affordable, in the inner suburbs they currently occupy. Millennials will go wherever such homes can be found.

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The pandemic wasn’t the only force moving the population. Simple demographics were also at play.

How the pandemic reshaped our settlement patterns

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The recently released population projections by the Centre for Population and the latest Budget 2023–24 assumptions suggest that Melbourne’s recovery is on an upwards trajectory.

This means that Millennials will largely skip the middle suburbs of Melbourne, where most empty-nester Baby Boomers aren’t even thinking of downsizing just yet. Australians rarely downsize out of financial consideration; they want to remain living independently in their family home for as long as possible. Only once the home becomes a nuisance to manage, or a physical hazard to the occupants, will Australians downsize at scale. The big Baby Boomer generation is still too young, healthy, and agile to downsize en masse. That will be a phenomenon of the 2030s as that generation’s health starts to go downhill.

So, for as long as Baby Boomers aren’t downsizing at scale, infill development in the middle suburbs will progress slowly. The young Millennial families will therefore only find affordable family-sized housing on the urban fringe and in regional Victoria. The current western, northern and eastern growth corridors will continue to add population at a rapid pace during the coming decade. Many Millennial families won’t settle in the outer suburbs, but rather move even further out to regional Victoria. Any regional town within a two-hour drive of Melbourne’s CBD will also see continued inflows of Millennial families.

Most regional towns outside a commutable distance from Melbourne will need to offer jobs and affordable housing to attract a new population. Some rural lifestyle towns will be sought out by the relatively small cohort of fully remote workers and retiring Baby Boomers. The good news is that the 2020s will see strong investment in local agriculture and manufacturing. The trend towards farm aggregations means the agricultural workforce will likely stagnate or shrink whilst output increases.

It looks like the loser in the great Victorian population reshuffle is the inner city. Should we just board up the windows and forsake the CBD for good? Absolutely not!

The CBD will recover and even surpass pre-pandemic levels in the coming years. Migrants are already starting to return to Australia and their impact on the housing market is very predictable. Initially they move into inner-city rentals before following the housing behaviour of the rest of the population after a few years. Even if on any given day about 15 per cent of

all workers work from home, the magnitude of historical population growth in Victoria (well above 100,000 people per year) guarantees a vibrant CBD.

The demand for housing in the state will remain very strong. The biggest challenge is to build enough infrastructure (we have about two decades to catch up on) and sufficient housing (especially social and key worker housing) to guarantee liveable cities and towns for our future population in Victoria.

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Victoria’s population spread

How the pandemic reshaped our settlement patterns

Building a property portfolio

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