Local House Price Effects of Internal Migration in Queensland: Australia's Interstate Migration Capital

• Published date: 01 September 2023
• Author: Isil Erol,Umut Unal
• Date: 01 September 2023
• DOI: http://doi.org/10.1111/1467-8462.12512

The Australian Economic Review, vol. 56, no. 3, pp. 308–327 DOI: 10.1111/1467-8462.12512

Local House Price Effects of Internal Migration in Queensland:

Australia's Interstate Migration Capital

Isil Erol and Umut Unal*

Abstract

We examine the causal impact of internal

migration on housing prices across 82

Statistical Areas Level 3 regions in

Queensland, Australia from 2014–2019. The

primary findings are: (i) an annual increase in

the inflow of migrants equal to 1 per cent of a

region's initial population leads to a 0.6 to 0.7

per cent annual increase in Queensland's

house prices across different empirical speci-

fications; (ii) this effect differs between the

Greater Brisbane metropolitan area and Rest

of State areas; (iii) migration from New South

Wales fails to produce a significant influence

on house price growth in Queensland.

1. Introduction

Overseas migration has been the main driver

of metropolitan population growth in

Australia over the last four decades, and it

has become a critical factor in the country's

urban housing market growth. Internal migra-

tion, on the other hand, has been reshaping

the geographical distribution of population in

the country, leading to growth on the fringe of

the major cities, as well as in particular coastal

centres, but also loss from parts of remote

Australia. Internal migration is a neglected

component of population changes as re-

searchers and policy‐makers generally focus

on natural increase (the excess of births over

deaths) and net overseas migration compo-

nents of population growth or decline.

Australia has the highest level of residential

mobility through internal migration amongst

other developed countries in Europe and the

United States. Queensland has become the

country's interstate migration capital over

recent decades mainly because an increasing

number of residents (natives and long‐term

immigrants) have been leaving mainly from

New South Wales (NSW) and moving to

Brisbane (the capital city of Queensland) and

second‐tier cities such as the Gold Coast and

the Sunshine Coast, and also smaller towns in

the rest of Queensland. According to the

Population Growth Highlights and Trends

reports published by Queensland Treasury, net

interstate migration increased by 233 per cent,

from 6,860 people in 2015 to 22,830 people

in 2019.

*Erol: Department of International Finance, Ozyegin

University, 34794 Istanbul, Turkey; Unal: Research

Institute for Labour and Social Affairs, Dělnická 213/

12, 170 00 Prague 7, Czech Republic. Corresponding

author: Unal, email <umut.unal@rilsa.cz>.

© 2023 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business

and Economics.

Published by John Wiley & Sons Australia, Ltd

This article provides some of the first

empirical evidence on the housing market

outcomes of internal migration in Australia

with a particular focus on Queensland—

Australia's interstate migration capital. Using

Australian Bureau ofd Statistics (ABS) data

by region, we study annual house price

changes in the 2014–2019 period across 82

Statistical Areas Level 3 (SA3), which are

geographical areas that generally have a

population of between 30,000 and 130,000

people and are designed to provide a regional

breakdown Australia's population. The panel

data comprise six years, because house price

data for small areas (across SA3 regions) have

been available since 2014. Our data allow us

to measure house price changes and the spatial

concentration of migrants yearly instead of

relying on discrete census data, as is typically

the case in the literature. Besides, working

with SA3‐level disaggregated data, rather than

state‐, metropolitan area‐or city‐level data is

crucial for studying the local economic impact

of internal migration, which is the primary

channel through which the population adjusts

to regional labour and housing market condi-

tions (Greenwood and Hunt 1984; Vermeulen

and van Ommeren 2009). Hence, we estimate

the impact of the migration inflow rate rather

than population growth on house price

changes.

The relationship between migration and

local housing markets is theoretically ambig-

uous. The influx of migrants into a region is

likely to increase the demand for housing and

the impact on prices would depend on supply

and demand adjustments. The housing sec-

tor's stock‐flow model differentiates between

short‐term and long‐term effects. In the short

term, when housing stock is fixed, house

prices rise due to the influx of migrants to a

region. In the long term, however, housing

supply expands. If housing markets are

unregulated, prices are expected to repond

positively to an influx of migrants in the short

run while the long‐run effect depends on

the responsiveness of housing supply to

changes in market conditions. Housing mar-

kets are often practically regulated, and price

adjustments may be constrained, potentially

delaying supply adjustments. An additional

challenge arises due to the simultaneous

causality between migration flows and house

price changes. On the one hand, house prices

may increase due to migration. On the other

hand, house prices could influence immi-

grants' location choices. All else being equal,

especially economic conditions, migrants

may choose to settle in a region with more

affordable housing (Sá 2015; d'Albis,

Boubtane and Coulibaly 2019).

Reflecting these considerations, the present

study uses a spatial correlation approach in

which the annual change in house prices in

different geographic areas is regressed on the

annual inflow of migrants in that same area

along with appropriate local area controls. To

address the potential endogeneity problem due

to simultaneous causality between migration

and house price changes we employ a

manually constructed instrument that matches

the shift–share instrument used in the immi-

gration literature.

To date, only a limited number of studies

have examined the impact of internal migra-

tion on house prices and/or rents for the

United States, China, New Zealand and

Sweden. These studies all find a positive

effect of internal migration on housing prices

and/or rents. For example, Howard and

Liebersohn (2021) examined the effect of

internal migration on housing markets through

the aggregate rent increase in all US cities and

found that changing migration demand ex-

plains 54 per cent of rent increases and 75 per

cent of CPI rent increases in the United States

from 2000–2018. For Chinese cities, a 1 per

cent increase in inter‐regional migrants (rural‐

to‐urban migration) results in a 0.70 per cent

(0.34 per cent) increase in housing prices

when controlling other relevant factors

(Wang, Hui and Sun 2017). Stillman and

Mare (2008) examined how population

change in New Zealand, through international

and internal migration flows, has affected

rents and sales prices of apartments and

houses from 1996–2006. The authors used

data from five censuses and found that

increases in internal migration flows are

associated with higher house prices—that is,

309Erol and Unal: House Prices and Internal Migration in Queensland

© 2023 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business

and Economics.