How will Australia’s easing population affect our property markets?

After two years of record population growth, Australia’s population boom is set to slow, according to a new study by economic forecasters BIS Shrapnel.

It forecasts national population growth to slow to about 1.5 per cent in 2010/11 and 1.3 per cent in 2011/12 as net overseas migration slows.

This would be a drop from record highs when our population grew by 2.1 per cent for the year ending March 2009, the highest recorded since the baby boom era.

Considering that a large part of our recent property boom has been due to increasing demand, what does this mean for our property markets?

BIS Shrapnel’s senior economist Jason Anderson says lower population growth will cause some dampening of household spending growth but cause some alleviation of inflationary pressure. This is good for property investors as there is likely to be less upward pressure on interest rates.

On the other hand the lower growth won’t be enough to overcome the housing shortage. BIS Shrapnel says even with lower population growth, the rate of new dwelling construction will remain below underlying demand. This means rental markets will stay very tight, rents would rise and so will property prices.

By the way… when Treasury predicted our population would reach 35 million by 2049, it was counting on population growth of around 1.8 per cent per annum, not the faster growth we’ve experienced over the past few years.


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