"The Block" got it wrong with Victoria

ABS stats do not show a regional shift

TV show "The Block" banked on the trend to regional dwelling in VIC. As the stats show, that was only a pandemic moment, and not a permanent restructuring of the markets.

Channel Nine's long-running "reality" television series "The Block", ended on what many have felt is a kind of failure. Five properties that had been built and renovated in the regional area of Gisborne, Victoria, were put up for auction at the end of the series, with the highest sale price determining the winner. While one property did sell in a range above the $4.0 million to $4.4 million suggested by the show's producers, three of the properties were passed in. The one that did sell did so just $20,000 over the reserve price, disappointing the contestants.

Had the show's producers taken a closer look at the available statistics, the surprise might not have occurred. While there was a surge in property purchases and developments in regional Victoria at the height of the pandemic, these have since fallen off sharply.

HNN has teased out those stats for the five states most affected by the move to regional areas. We've taken the number of building approvals, and divided them by the total number of approvals for each state, to provide the percentage of all approvals that were regionally based.

These are presented in 12-month periods, ending in September (the month for which the most recent stats are available). We refer to these with the prefix "p", so p2020 would be the period from October 2019 to September 2021.

New South Wales

New South Wales (NSW) has always had more complex patterns than the other states when it comes to regional building stats. That's because the state has a number of regional centres. By contrast, the next most populous state, Victoria (VIC) really only has one (Geelong), and it is quite secondary by size.

Chart 1 shows the contrast between building approvals issued for Sydney, and for the rest of the state.

The top graph shows the percentage of overall building approvals made up by approvals issued outside of Sydney. Perhaps what's most surprising is the degree to which the pandemic years altered seasonality more than numbers. Previously September had ben a high point in terms of proportion, but in both p2021 and p2022 September came to represent a low point.

Looking at the middle graph, of building approvals in Sydney, it can be seem why, as city approvals spiked during those two periods. Correspondingly, as the bottom graph shows, regional approvals were not at their lowest level, but far off the high as well.

As the bottom graph shows, the period from February 2021 through to August 2021 showed the highest number of approvals. Over the same period in the subsequent year, levels were elevated over pre-pandemic periods, but far off the highs of the previous year.

Victoria

These are the graphs that the Nine Network should have consulted before commissioning the recent "Block".

As the top graph shows, the proportion of regional approvals climbed steeply from October 2020 through to May 2021. There was an additional spike for March 2022, but for most of the rest of the time the pandemic regional approvals have been in line with pre-pandemic seasonal trends.

Contrasting the middle graph for Melbourne approvals with the bottom chart for regional approvals, its clear that regional approvals did make a considerable impression through p2021, trending well above the usual seasonal activity. Yet this seemed to come to an abrupt end at the start of p2022, in October 2021, outside of some additional activity in February and March 2022. Approvals basically reverted to the pre-pandemic norm from April 2022 onwards.

Queensland

Queensland (QLD) is, of course, its very own unique case as well. In fact, as the top graph of Chart 3 indicates, the proportion of regional building approvals reached its highest levels during p2022, peaking in March 2022, and from June to September 2022.

What is most striking about the middle graph, for approvals in the Greater Brisbane area, is that after a high level of activity from February to September 2021, the number of approvals has moved much closer to the historical average.

Meanwhile the bottom graph clearly shows that regional approvals have tended to trend well above the historical average for both p2021 and p2022.

South Australia

While QLD indicates ongoing activity in regional areas, South Australia (SA) shows a very strong upshift in regional approvals. As the top graph in Chart 4 indicates, in terms of proportions, SA reached its highest for regional approvals in September 2022.

The middle graph shows that while approvals in Adelaide reached peaks during p2021, approvals were still above average, but had retreated considerably. In contrast, the bottom graph shows that regional approvals in SA were well above average for both p2021 and p2022.

Western Australia

As with QLD, it's interesting to note that for Western Australia (WA) the proportion of regional approvals reaches a seasonal high for July to September 2022 as shown in Chart 5.

The middle chart illustrates just how astounding p2021 was for WA, with 11 of the 12 months setting new record highs for approvals in Perth. That's echoed in the bottom graph for regional approvals as well, with regional approvals tending to trend just above averages.

Analysis

What the executives at the Nine Network missed was that it is evident the transition to regional housing was very much a response to the pandemic, and not part of a longer term restructuring of the real estate market. That restructuring is more evident in many of the other states, where there has been more persistence in regional building approvals during p2022.

To a large extent, for VIC, this reflects a surprisingly centralised structure - given it is one of the smaller states geographically. NSW has its separate regional areas, and QLD has vast ex-urban areas that have long formed their own sub-regions.

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