Locations close to CBDs have the highest concentration of workers in jobs that can be done remotely and the highest housing prices. The impact of this will become pronounced as employers and employees adapt to life after the pandemic, with regional Australia the big winner.

The pandemic has changed where, and how, we work. These changes are already having an impact on the property market and will continue to do so as more city dwellers take advantage of the lifestyle benefits and lower housing costs outside of cities.

In this analysis, I calculate the industries that have the greatest ability to work-from-home and outline where employees of those industries live in Australia. Then we’ll address the impact on property prices and whether cities will maintain a premium in a future characterised by flexible work.

What industries have the greatest work-from-home capability?

Jobs that can be done remotely are most predominant in industries such as education, professional services, finance and media. These industries have many office-based jobs that have been shown throughout the pandemic to be able to be completed remotely.

Estimates of the specific share of each industry are based on a comprehensive 2020 survey of the tasks performed by each occupation in the United States.
These categorizations are likely to be broadly similar in Australia, but may not represent what jobs continue to be done remotely after lockdowns are lifted. For example, teachers are likely to return to face-to-face instruction next year.

Identifying where workers in these industries live provides a starting point for what areas are likely to see the biggest disruption from greater work-from-home flexibility in the post-COVID-19 world.

The concentration of those able to work remotely is highest close to cities

Those living close to major cities are most likely to be able to work from home. This is not surprising given industries focused on information and heavy use of technology have benefited from the density of complementary skills within cities.

These estimates use the share of employed people by industry in each of Australia’s SA4 geographical regions – as defined by the Australian Bureau of Statistics – in the year before the pandemic.

The regions with the highest share of those employed before the pandemic – close to half – are close to CBDs in Sydney and Melbourne.

High-priced markets have the highest potential for disruption

Increased work-from-home flexibility in the aftermath of the COVID-19 pandemic has the greatest potential to affect expensive housing markets. This is for two reasons.

First, expensive markets are almost always close to CBDs and therefore have the highest share of workers able to work from home.

Second, those living in expensive markets have the greatest potential to save money by reducing their housing costs by moving. Alternatively, many may be able to purchase larger homes in regional areas, for example to support growing families.

This combination of higher ability to move and maintain current employment, and greater benefits from doing so, means expensive property markets in inner cities are likely to be the most vulnerable to post-pandemic working arrangements.

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This has already benefited regional markets

On the other side of the coin, the disruption of inner-city markets has helped spark a boom in regional markets.

Regions with a lower share of those able to work from home before the pandemic (generally regional areas) have seen the highest housing price growth in the past market cycle.

Much of this has been driven by an increase in demand from those who now have greater geographical mobility. And more people are likely to be able to make similar moves as remote working arrangements are finalised in more workplaces, and workers sort into remote-friendly employers if they aspire to leave cities.

But cities will retain their appeal

The rise of remote working will not eliminate the appeal of cities.

Cities will maintain their benefits for workers, so will continue to enjoy a price premium.

We must not forget why so many live in cities in the first place. The dense environment of cities encourages higher productivity for workers and employers, partly by building complementarities between workers. This has been shown to increase innovation and incomes for workers.

The density of cities will also continue to provide the biggest array of services and amenities for their residents, such as restaurants and cultural activities.

But the rise of work-from-home flexibility is likely to lead to a rebalance of the property market towards more regional areas, a trend we have seen gain steam over the past year.