Our population boom will push up property prices

When I read the recent population growth statistics I came to 2 conclusions:

1. Santa must have been busier than ever a few weeks ago, visiting more people than ever!

2. Property investors are in for a good time, as the supply and demand equation will keep driving up property values.

The good news is that Australian Bureau of Statistics data shows that our population grew by 2.1% for the year ending March 2009, the highest recorded since the baby boom era. And this growth rate is expected to rise in the coming years, with Treasury predicting a population of 35 million by 2049.

Where are we going to put them all?

Let’s take a quick look at what this means for us as property investors…

Tony Richards, Head of the Economic Analysis Department at the Reserve Bank of Australia (RBA), says that based on an average growth rate of 2.1%, the demand for new dwellings will be 165,000 each year, however it’s unlikely this demand will be met as we’re only building around 130,000 new dwellings annually, meaning a shortfall of around 35,000 each year, adding to our already existing housing shortfall.

We already know that property values depend upon the supply and demand equation. Between the growing population and the declining average number of persons in one household, the demand for more homes is growing even faster.

Increased demand and insufficient supply – there is only one way for rents and property values to go – and that is up!

Where are all the people going to live?

Currently 70% of people live in and around our capital cities and it is suggested that this proportion is going to increase over the coming years to closer to 80%.

More new migrants and immigrants moved to Melbourne than any other capital city over the last year, while Queensland was the most popular state with a 20,000 increase in population.  Meanwhile, NSW and South Australia were the places people were most likely to relocate from, losing 21,900 and 5,000 persons respectively.

South Australia and Tasmania had the lowest average growth rate, at 1.2% and 1.0%.

Here are the numbers in more detail:

State Population end March qtr 2009 Change over previous year
New South Wales 7,076,000 1.6%
Victoria 5,402,600 2.1%
Queensland 4,380,400 2.6%
South Australia 1,618,200 1.2%
Western Australia 2,224,300 3.1%
Tasmania 501,800 1.0%
Northern Territory 223,100 2.2%
ACT 349,900 1.8%
Australia total 21,779,100 2.1%

Source ABS, Dept of Housing.

To me the conclusion is inescapable…more demand for certain properties (not every type of property) and insufficient supply will mean the price of the type of property that a large proportion of our population is looking for can only increase in value.  As a property investor if you own properties close to the CBD of our major capitals or close to water, you will be rewarded with rising values and increasing rents.


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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

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