03 Jan Sydney Exodus, Migration Shifts and What It Means for Housing Markets
Australia’s housing landscape is undergoing significant change as a growing number of people leave Sydney in response to rising living costs, especially housing. Recent migration data shows a substantial internal outflow from the city, highlighting how affordability pressures continue to reshape population patterns and impact housing demand across the country. For lenders, investors, and market analysts, these shifts have meaningful implications for borrowing behaviour, regional growth, and the broader lending environment.
The Exodus from Sydney: What the Data Shows
In the 2024 financial year, more than 100,000 residents reportedly left Sydney through internal migration. Of these, just over 63,000 people moved into the city from elsewhere in Australia, creating a net domestic population loss of more than 41,000 residents.
Without the counterbalance of strong overseas migration, Sydney would have recorded an overall population decline. This highlights how dependent the city is on international arrivals to maintain population growth and offset ongoing domestic departures.
The key driver behind this exodus is housing. Sydney continues to hold some of the highest property prices in the country, making both renting and buying increasingly difficult for many households. For those seeking more space, better value, or financial breathing room, relocating to more affordable regions has become a practical alternative.
High housing costs are the result of long-term supply constraints. Dwelling construction has consistently lagged behind population growth, pushing up prices and intensifying competition for available homes. As a result, affordability challenges have become deeply embedded in the market, affecting first-home buyers, upsizers, downsizers, and renters alike.
These pressures have led to a wave of outward migration, with household budgets stretched by mortgage repayments, rental increases, and broader cost-of-living pressures. Many families and individuals are choosing to relocate to regional centres, smaller cities, or neighbouring states where housing is more accessible and lifestyle balance is easier to achieve.
Why the Shift Matters: Lending, Demand and Market Dynamics
Demand rebalancing across Australia
The outflow from Sydney is reshaping demand patterns nationwide. As households seek more affordable living options, regional markets and secondary cities are receiving a boost in buyer interest. These areas offer comparatively lower property prices, creating opportunities for borrowers who may have been priced out of Sydney.
For lenders, this shift may translate into increased mortgage activity in areas that historically saw less demand. Investors also tend to take interest in regions where price accessibility, rental demand, and lifestyle appeal converge, opening new avenues for growth outside traditional metropolitan hotspots.
Affordability challenges impacting borrowing behaviour
Sydney’s market has reached a point where the cost-to-income ratio places significant pressure on households. In high-cost markets like this, borrowers can be more vulnerable to interest-rate fluctuations and unexpected financial stress.
By contrast, households relocating to more affordable regions often find their borrowing capacity improves when housing prices are lower relative to income. This may lead to loans that are more sustainable over the long term, with borrowers experiencing less strain under variable interest-rate environments.
Rental market strength in both capital cities and regional areas
As homeownership becomes more difficult to achieve in Sydney, rental demand remains high. However, the shift in population also increases rental demand in regional and emerging markets. Areas experiencing strong inward migration typically see increased competition for rentals, contributing to low vacancy rates and rising yields.
For investors, this can create opportunities in markets where rental pressure is intensifying, further fuelling interest in income-producing assets located outside traditional capital-city centres.
Ongoing supply issues keeping pressure on prices
Australia’s housing supply shortage remains one of the most influential factors in the nation’s property landscape. Even as people move away from Sydney, they are entering markets that also face supply limitations although often to a lesser degree.
Tight supply in growth regions means that demand from internal migration, combined with overseas arrivals, can quickly place upward pressure on prices and rents. This structural imbalance between supply and demand will likely remain a key theme in the Australian property market over the coming years.
What This Means for Investors, Lenders and Market Observers
The rise in internal migration out of Sydney brings several notable implications for the lending environment and broader property ecosystem.
1. Growth opportunities in regional and secondary markets
Many of the receiving markets both regional and coastal are experiencing strengthened demand as affordability and lifestyle trends drive population inflows. This may create conditions for stable price growth and attractive rental returns.
2. Changing borrower profiles and loan dynamics
Relocating to more affordable areas often shifts borrowers into a more favourable financial position. Loan-to-value ratios may improve, and serviceability can become more manageable, potentially reducing long-term risk for lenders.
3. Continued demand for rental accommodation
With homeownership unattainable for many households in expensive cities, rental demand will likely remain elevated. In emerging markets, population increases can amplify rental demand even further, strengthening yield potential.
4. Infrastructure and planning considerations
Growing regional populations require expanded infrastructure, community planning, and services. Markets that successfully deliver these elements may continue to attract new residents and sustain long-term growth, while those with limited infrastructure may face future bottlenecks.
Strategic Outlook: Key Factors to Watch Over the Next Two Years
Several trends will likely shape Australia’s lending and housing environment moving forward:
- Interest-rate movements: Borrower serviceability remains sensitive to rate shifts. Affordable regions may be better positioned to absorb changes than Australia’s most expensive cities.
- Housing supply delivery: Construction capacity and planning approvals will play a major role in how markets respond to demand pressure.
- Migration trends: Both internal and overseas migration will continue to influence demand patterns and property market dynamics.
- Economic conditions: Cost-of-living pressures, wage growth, and employment stability will impact household borrowing behaviour.
- Rental market intensity: Tight vacancy rates and rising rents may continue to influence investment decisions and housing affordability.
Conclusion: A Market in Transition
The ongoing exodus from Sydney highlights a broader shift in Australia’s housing landscape. While affordability pressures continue to challenge residents in major capital cities, regional and secondary markets are benefiting from increasing population inflows and renewed interest from both homeowners and investors.
These dynamics are influencing lending patterns, shaping market demand, and reframing the geography of opportunity across the country. As population movements, supply constraints, and economic forces continue to evolve, the Australian property market in 2025 appears poised for a period of structural transition, one defined by affordability decisions, regional growth, and shifting borrowing behaviours.