New housing estates and high density apartment suburbs are most at risk.
Parts of Sydney are at risk of becoming a modern “rust belt” where AI-led job losses and wage freezes will force masses of property owners to sell, slashing local home values, new research shows
A total 45 Sydney areas were deemed to have a “high risk” of AI leading to redundancies and stifled salaries that would gut house values, with much of the Hills District and Blacktown flagged as especially vulnerable.
Additional geographic regions with higher risk were high-rise precincts with a heavy concentration of newly-built units – such as St Leonards and Sydney Olympic Park.
The research by analytics group FoundIt flagged these areas as the most threatened because they had a higher share of white collar works in exposed industries paying off recently started mortgages.
These households relied almost exclusively on white collar wages to pay down high levels of debt while having little equity, business income or other assets to rely on for support if facing job loss.
Large number of job losses in a concentrated area have typically led to more forced home sales. Picture: Max Mason-Hubers
FoundIt identified that new housing estates in the northwest would be vulnerable too if AI advances helped stifle wages, viewed by many futurists as a more likely AI outcome in the short-term.
FoundIt head of research Kent Lardner said the danger for Sydney was the high debt needed to buy a home pushed many families into mortgage stress and they desperately need pay rises to claw their way out.
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“Suppressed wages is probably the biggest pain point,” Mr Lardner said.
“Companies that invest heavily in AI systems will likely keep the bulk of that profit. For employees, there will be a long wait between that implementation and when they get some of those crumbs.
“The danger is that we already have so many people on the brink after five interest rate hikes this year … soft wage growth has a significant impact when your mortgage costs keep rising.”
FoundIt’s research was based on data from the Department of Employment and Jobs and Skills Australia’s latest Generative AI Capacity Study, along with ABS census data.
The city areas determined to have the highest volume of exposed employees was then modelled against ABS mortgage figures to identify where AI-fuelled job loss would have the biggest housing impact.
The most vulnerable (SA2) areas were identified as Kellyville-West, Schofields-Colebee, Kellyvile-Ridge-The Ponds, North Kellyville, Glenwood and Rouse Hill-Beumont Hills.
These areas typically had a higher supply of newly-built housing and few residents had owned their homes for more than five years.
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FoundIt head of research Kent Lardner said the AI impact varied by mortgage stress levels.
The most common jobs in these areas were clerical, administrative and professional roles that government data flagged as having the potential to be automated or augmented by AI advances.
“Not every suburb housing market will be impacted the same way. Just because the job is affected doesn’t mean the impact will flow through evenly,” Mr Lardner said.
He added that the inner west and north shore also had a high number of white collar workers, but the key difference was that they had larger numbers of homeowners in fully paid off properties.
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Sydney’s east was among the least exposed because there were larger numbers of residents relying on business income and investments.
“It’s those who rely on a salary who risk being the losers from AI,” Mr Lardner said. “Business owners and investors could be the winners from AI. And they tend to live in (eastern suburbs) like Darling Point.”
AMP Capital chief economist Shane Oliver said AI could impact housing in a much different way to previous technology-led upheavals.
Past disruptions affected blue-collar workers, particularly the loss of manufacturing across Australia in the 1990s, but many blue collar workers were in a safer position, Dr Oliver said.
AMP chief economist Shane Oliver said job cuts from AI were not guaranteed.
“Here the impact is more on white-collar workers, finance and professional services,” he said, noting the new AI industries creates may not pay as well as current white collar roles.
“They won’t necessarily be high-end jobs,” he said. “There is a lot of uncertainty.
“The optimist in me says that it will probably turn out OK … but that doesn’t mean there won’t be a period of upset for white-collar jobs.”
