People – Australia’s new growth commodity


For some time now there have been reports of a slowdown in Australia’s resource sector, which almost singlehandedly underpinned the Australian economy during the last decade as Chinese demand for anything we could dig out of the ground grew exponentially.

In fact, it could be said that the mining industry essentially shielded us from the GFC.

Looking back at any given time in this country’s history, you can generally identify one or two major drivers as the catalyst for the fate of our fiscal fortunes.

So as the brakes are applied to the resource boom, this begs the question; what will become Australia’s new primary growth driver?

Quite simply, the answer is human beings.

Or more specifically, all of the infrastructure, services and amenity we need to sustain us, like housing, food and transport.

The big boom

Australia’s population has been growing faster than any other developed nation for some time.

ABS Demographic Statistics show that in the 2013-14 financial year, Australia’s population grew by 1.6% (365,000 people)


This influx of new residents, along with lower interest rates and slowly increasing consumer confidence are strong growth drivers for our property markets.

Of course this recent flurry of activity in our residential real estate markets has caused many commentators to suggest it’s too much, too soon, with claims that current price movements are unsustainable and will inevitably cause a property bubble.

But the fact is people need homes and as our population continues to grow, so too does housing demand.

Savvy property investors recognise that this underlying demand will ultimately continue to support the residential housing sector for some time to come.

In fact, population growth seems to be making a distinct difference across the board when it comes to our economic prosperity.

In 2013 Australia’s GDP grew by 2.3 per cent, however if you subtract the effect of population growth, this decreases to just 0.5 per cent.

A trend that’s markedly different from the rest of the developed world, where populations are barely growing and if anything, seem to be on the decline.

Where are they coming from?

With government policy seemingly intended to decrease the number of new arrivals to our shores, you could be forgiven for wondering where on earth all of these additional residents are coming from.

world foreign handWell, last year the vast majority of new Aussies who arrived last year hailed from just across the water.

Some 25,000 New Zealanders, compared to 20,000 Chinese and 20,000 Indians, took up residency in Australia across 2013.

However, it’s anticipated that the number of new Chinese arrivals will soon out pace their Kiwi counterparts as the revived business migration scheme favours cashed up Chinese citizens who can buy their way in for a cool $5 million.

Then there’s the recovering international education market, with new overseas student commencements up 10 per cent this year, after faltering by 10 per cent annually for the previous three years.

What does it all mean for our property markets?

Interestingly, although new construction approvals have picked up significantly in recent times, increasing from 150,000 to 160,000 a year for the last decade to 210,000 per annum, the number of per capita housing starts have been on a downward trajectory for the last 40 years and continue to fall (see below graph).

Population growth

Essentially, this means that the much talked about supply and demand imbalance in Australia’s residential property sector looks set to continue for some time to come, with a need for not only more housing but all the infrastructure required to support our growing communities.

People who buy houses also buy furniture and white goods to fill them.200319384-001

Large estates constructed on the outskirts of our cities means an increased need for road and transport links and of course, more shops, restaurants, cafes and lifestyle amenity for all those new residents to enjoy their own ‘Great Australian Dream’.

As such, it appears that Australia’s population boom will see non-mining construction – in the housing, retail and transport sectors – take over as the key driver of our future economic prosperity for the foreseeable future.

For those who own well positioned property investments, close to established and growing city centres with plenty of existing infrastructure, this can only mean one thing in the long term…show me the money!


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Brett Warren is Director of Metropole Properties Brisbane and uses his 13 plus years property investment experience to advise clients how to grow, protect and pass on their build their wealth through property. Visit: Metropole Brisbane

'People – Australia’s new growth commodity' have 1 comment

    Avatar for Brett Warren

    May 22, 2015 George

    Hmm. How some economists think the world is as simple as Supply and demand. I dont think its that simple. Good old high school economics will tell you that both are affected by prices. As prices increase, less people can afford to buy and so demand falls. On the contrary as prices increase so does the profitabilty and so supply increases. At some point we reach equilibrium but that does not mean ever increasing property prices as this simple economic rule points out. Equilibrium, whenever we get there, means stability in prices. Then you add affordability into the equation which is affected by incomes and by the cost of borrowing. So for prices to continue increasing you really need increasing affordability whether it is increasing incomes or reduced cost of borrowing. And we all know how these can change and the huge impact they have on property prices more so than the supply and demand equation. By example the current boom in property prices is not driven by demand but rather by improved affordability created by an articially low interest rate environment. Wait and see what happens when either interest rates increase or peoples incomes are supressed or threatened by higher unemployment.


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