A thriving population and a prosperous workforce – the factors shaping a stronger Melbourne

Hari Hara Priya Kannan

Data Scientist, The Demographics Group

Over the past decade, Melbourne's population has experienced fluctuations and shifts.

In 2012, the population stood at approximately 4.2 million, steadily growing to reach 5 million by 2019. During this period, the city witnessed a consistent increase in population, averaging around 100,000 new arrivals per year. About 70 per cent of the population increase can be attributed to an increase in net overseas migration.

However, the emergence of the pandemic brought about a drastic change. The imposition of lockdowns and travel restrictions led to a significant drop in population growth, with only around 53,000 individuals being added in the 2019–20 financial year, then in the following financial year, 2020–21, Melbourne recorded its first negative population growth since 1952, losing around 79,000 people. Fortunately, as restrictions eased, a swift recovery was observed, with an addition of approximately 55,000 individuals in 2021–22.

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, and it is anticipated we will reach a population of 6 million by 2032, adding around 92,000 people annually from 2023 onwards.

So what does this mean for residential real estate? As the population increases, there is a spillover effect on the housing market whereby the demand for property increases. This begs the question, where will these people want to live?

Components of population change, Greater Melbourne, 2016–2033

The influence of workforce trends has a powerful impact on the future of Melbourne’s property market. Our jobs not only determine the income that flows into our pockets, but also the type and location of housing required. Interestingly, the current workforce landscape exhibits a remarkable surge in the knowledge based sector. In Australia, each job is classified into skill levels ranging from 1 to 5, based on the qualifications required to perform the tasks. Skill level 1 represents the highest level of expertise, such as professionals in the tech industry, doctors and professions that demand a university degree, while skill level 5 encompasses jobs where skills are acquired on the job, like café workers and cleaners.

Recent labour force statistics from the Australian Bureau of Statistics (ABS) reveal that as of February 2023 approximately 37 per cent of workers in Victoria, are employed in skill level 1 occupations. Nationwide, this figure stands at 35 per cent. What's even more exciting is that the National Skills Commission predicts a phenomenal 53 per cent of jobs growth between 2021 and 2026 to come from skill level 1 occupations. Interestingly, nearly the top 50 suburbs with the highest concentration of skill level 1 workers in Melbourne predominantly reside in Melbourne's inner and eastern suburbs, with East Melbourne leading the way, closely followed by Clifton Hill, South Yarra and Fitzroy.

Although the pandemic facilitated the transition to remote work for most of these individuals, we can observe that these trends are gradually diminishing. While working from home every day may not be feasible or desirable for everyone, many are now embracing a hybrid work model where they commute to the office for a few days each week. According to data from the City of Melbourne, commuter levels during office hours have reached 63 per cent of the levels seen before the pandemic, suggesting that more and more workers are returning to the CBD.

Top 20 suburbs of residence for skill level 1 workers, Greater Melbourne, 2021

We know that a growing population leads in turn to a growing workforce, and with the strongest growth anticipated to be in the skill level 1 cohort, it is logical to assume that the demand in these suburbs will only increase and the heightened demand will lead to improved amenities to support a hybrid workforce, in turn creating further competition and demand for both buyers and renters throughout the next decade.

Want to learn more? Nick Carah, Jellis Craig Group General Manager and Data Scientist, Hari Hara Priya Kannan take a deep dive into the factors shaping a stronger workforce, in our new podcast series: Inside Melbourne's Property Market.

UP NEXT

A thriving population and a prosperous workforce – the factors shaping a stronger Melbourne

Melbourne’s rental market - Navigating a challenging period and a changing landscape

Enter your details to download

The Report has been emailed to your account.

There was an error processing your submission