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This is a game changer for property

While nothing in life is guaranteed, there are many rational, logical, and understandable reasons to believe the value of well-located real estate will continue to appreciate over time.

Many factors like interest rates, employment levels, supply and demand and market confidence, affect a country’s property prices in the short term; in the long term prices are driven by two main factors:

  1. Household Formation – which is a function of population growth, and
  2. The wealth of the nation

So let’s examine these 2 factors in more detail:

 

Look at what’s happening to Australia’s population

Last year our population increased by close to 400,000 people, which means we’re growing faster than most developed nations.

This is in part due to natural growth (we’re making babies faster than people are dying) but mainly due to overseas migration.

Just to put things into perspective, it’s a bit like adding an extra Canberra to Australia each year. We’re growing at around 1.8% per annum USA (0.8%); UK 0.6%; Canada 1%; China 0.6%

At the projected rate of growth, our population is likely to grow by 10% over the next 5 years which means around 2.3 million more people will need somewhere to live.

That’s an awful lot of houses and apartments.

But here’s the game changer…

The latest Australian Bureau of Statistics (ABS) national population growth projections suggest our population is likely to double in the next 62 years.

This anticipated population increase, which has tripled in the last decade, will have profound effects on our property markets.

Remember it took us over two centuries to reach 23 million people and now this is projected to double in numbers in around 60 years.[sam id=41 codes=’true’]

Of course these numbers are not set in stone as no one really knows what will happen to government policy on immigration numbers, however it does seem inevitable that our population will expand substantially which will have a significant impact on our property markets.

It means we’ll need to build around 8 million additional homes, plus all the shopping centers, schools, hospital and infrastructure to support 23 million more people while at the same time as somehow managing to support 17 million more cars on our roads.

Looking at a state level the proportion of population residing in New South Wales, South Australia, Tasmania and Northern Territory is projected to fall.

At the same time the proportion is projected to remain static in Victoria and rise across Queensland, Western Australia and the Australian Capital Territory.

Where will all these people live?

Of course the big question is where will all these people live.

Well…it seems that a significant majority are likely to want to live in our capital cities.

Currently the proportion of Australian’s living in a capital city (66.1%) is already high compared to world standards however this is projected to increase to 73.4% by 2061.

These long-term projections bring up some interesting points.

Firstly in the next fifty years or so, almost three out of every four Australians will live in a capital city.

Currently 57.3% of Australians live in our four big capital cities – Sydney, Melbourne, Brisbane or Perth but if the ABS population projections pan out, by 2061 65.8% of the total national population will live in our four big capital cities – Sydney, Melbourne, Brisbane and Perth.

Perhaps you can now see why I have been recommending investing in these locations in my blogs.

Which is going to be our biggest city?

The other interesting forecast is that by 2061 Melbourne will have a larger population (8,580,556) than Sydney (8,493,740) and Perth will be home to more people (5,451,406) than Brisbane (4,787,996).

Of course a lot can happen between now and then, but it may not even take as long as that because the ABS forecasts that Perth will overtake Brisbane as the third most populous city in 2028 and Melbourne’s population will overtake Sydney’s number one spot in 2053.

Boy will it will be interesting to see what our big cities will look like in the future, but no doubt this huge increase in population will lead to significant challenges including where all these people will live, how we will house them, what infrastructure changes will be needed what all this could mean for property values and affordability in our big cities.

While the edges of our metropolises will sprawl out further, there is little doubt the centers of our cities will become denser with more of us living in apartments and townhouses.

What does this mean for property?

With more and more of us wanting to live in the four big cities, our old friend the supply and demand ratio will keep pushing up the value of well-located inner and middle ring suburban properties.

Sure these properties will be unaffordable for some who’ll remain tenants, but others will be able to afford these higher priced properties, as I don’t think that anyone would argue that as a nation Australia will become wealthier over the next few decades.

Australia is well positioned to benefit from the growth of Asia, which represents 50 % of the world’s population. If our politicians play their cards right we stand poised to capitalise on an economic transformation unparalleled in our nation’s history.

So if, like me, you are confident that Australia has a prosperous future and agree that our population is going to increase significantly and that most of us are going to want to live in much the same parts of our lucky country, you can understand why I see a strong long-term future for our capital city property markets.

Here’s what you can do about this..

If you want to take advantage of the opportunities our growing property markets will offer you now is a good time to consider your options.

If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level. Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'This is a game changer for property' have 4 comments

  1. Avatar for Property Update

    March 21, 2014 @ 7:33 am Lorraine Blint

    Thanks Michael
    This puts an interesting perspective on things. Doubling our population will put a real strain on our infrastructure unless we plan ahead, but as you say it will underpin our property markets and I want ot own some of those millions of new properties that will be built

    Reply

    • Avatar for Property Update

      March 21, 2014 @ 7:35 am Michael Yardney

      Thanks for the comment Lorraine.
      Sure there will be issues with such rapid growth, but there will be opportunities – not only for properties investors, but it should unerspin our economy in general helping create jobs and increasing tax revenue to pay for the new infrastrcuture

      Reply

  2. Avatar for Property Update

    March 21, 2014 @ 11:37 am Anton

    Hi Michael,
    As a Victorian who is in the building industry, there is one thing that is currently happening throughout the State, in particular Melbourne and it’s surrounding suburbs which has the potential to derail the construction market and that is with the introduction of the new Planning Zones:
    IE. The General Residential Zones,
    Neighbourhood Residential Zones,
    Activity Centre Zones etc…

    All Res 1,2 & 3 zones will be deleted from the Planning Scheme on the 1st July 2014; if not the new zones are not approved (regardless of those additional requests by Council above) all zones will revert to a “General Residential Zone” in the interim.

    Numerous Council’s are also requesting the Minister to introduce in addition to already restrictive requirements of the new Planning Scheme minimum subdivisions of 400m2 (eg. Bayside Council). Thereby any dual occupancy / two dwelling site must be at least 800m2 in area, any less will be prohibited under the Planning Scheme. Three (3) unit / dwelling site will require 1200m2 min etc, etc…
    This will come to a shock to many property owners, developers, investors, designers and the like. High / increased density housing will only be limited to those areas which have been designated as “Activity Centres” by the Council. These high density “Activity Centre” locations are significantly less under the new Planning Scheme as opposed to the current Planning Scheme, which currently allows for subdivisions on much smaller allotments.
    The majority of re-zoned Residential 1 zones in Municipalities will now fall under the more restrictive Neighbourhood Residential Zones. This will naturally in turn effect property values, development yields, designs will be very restrictive and hence effect whole feasibility of a residential development.
    As noted our population is increasing at unprecedented numbers and the Planning Schemes should be promoting high density design in it’s established areas where the established infrastructure existing.
    It is commonly known that Melbourne is one of the most poorly designed Cities in the world and is in area one of the biggest Cities in world due to our Urban sprawl which has been caused by poor Planning design and governance.
    You need to look into this, as it has the potential to greatly impact the industry and property prices throughout the Melbourne and it’s greater suburbs.

    Regards…

    Reply

  3. Avatar for Property Update

    March 21, 2014 @ 11:45 am VivKay

    “At the projected rate of growth, our population is likely to grow by 10% over the next 5 years which means around 2.3 million more people will need somewhere to live…” Our government deliberately “projects” our population to increase at these third world rates, but there’s no plans for infrastructure, public services, health care, education, social housing or even affordable housing, to keep up with demand. What we need is some real economic growth, via production, innovation, knowledge-based inventions and skills. This amassing of people, with 60% of our population growth attributed to net overseas migration, is “dumb” growth, and not genuine economic growth. Melbourne’s economy needs to be diversified. At the moment, the most flourishing economic activity is housing and property – but it’s adding to our infrastructure debt, traffic congestion and lowering our living standards! We need some new economic model, not one in tandem with the housing bubble!

    Reply


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