Australia’s continuing population growth has been big news in recent times, with talk of urban congestion and failing infrastructure that is simply not coping with the demands of the thousands of new residents pouring into our major urban centers every year.
Obviously property investors keep a keen eye on population growth, as it’s one of the key drivers of demand that pushes up property prices.
So if was of interest that the latest figures from the Australian Bureau of Statistics reveal that population growth has slowed considerably from its peak level of 2.2 per cent in 2008, down to just 1.6 per cent for the year to September 2010.
In fact our current growth rate has dropped back to close to our 25 year average, with 345,000 new residents for the latest year; primarily due to a slow down in the surge of net overseas migration that we witnessed in the past few years.
Let’s look at what this means for property with some questions and answers…
What do the latest population figures show?
On a percentage basis Western Australia remains the leader with population growth of 2.1 per cent for the current year, Queensland came in second at 1.8 per cent, followed by Victoria and the ACT both on 1.7 per cent, NSW and the NT on 1.3 per cent, South Australia with 1.1 per cent while Tasmania grew by just 0.8 per cent.
However when looking at numbers more carefully for the ninth year in a row Melbourne, which grew by 79,000 people, had the biggest growth of any city. Since 2001, Melbourne has added 605,000 new residents; Sydney grew by 447,000 people, Brisbane by 380,000 and 303,000 people moved to Perth.
Interestingly for the first time in 30 years, Melbourne’s population is within 500,000 of Sydney’s, and gaining. Currently the population of Sydney is 4.575 million people and Melbourne has 4.077 million residents. If the growth rates of 2001-10 continue, Melbourne will overtake Sydney in 2028, when each city would have roughly 5.6 million people.
What does slower population growth mean to population projections?
If our population growth is slowing does this mean to the ABS predictions of an Australian population in the vicinity of 35 million by the year 2051 is less likely to eventuate?
Apparently not, with their forecast still suggesting we will number 34.2 million by the middle of this century.
Will population growth keep slowing?
This lower level of population growth is likely to be short lived.
The bottom line is that we are an ageing population and in order to sustain our economy and support the millions of retirees and pensioners that will be flooding the health and welfare systems over the coming years, we simply have to “populate or perish”.
Regardless of how hard our politicians push the political barrow and how much noise they make about slowing down immigration, the fact remains that we have to increase our skilled labour force.
Then there’s the rising rate of natural population growth due to our increasing lifespan and birth rate, which is completely outside the government’s control.
What this boils down to is that the answer to the issues facing our expanding urban centers are not control, but management of the growing population.
With both Sydney and Melbourne predicted to house around 7 million people each in the next fifty years (based on the current rate of growth) the biggest concern is – how are we going to have sustainable growth?
What about affordability?
Australia has already earned an international reputation as the least affordable country in the developed world, so this extra demand on our already under-supplied accommodation will more than likely see property values continue to rise steadily into the future.
The inescapable fact is that as our cities mature and grow the value of properties will increase significantly, as will rents.
What of that continuing issue surrounding infrastructure (or lack thereof)?
Sydney is already struggling with an inadequate train and road system. So how will it cope when its population swells to 5,133,000 (currently 4,553,100) over the next 10 years?
I know some suggest slowing down migration is the answer, but it’s not as simple as that…
We simply cannot halt population growth in order to address these ongoing concerns. Our changing demographics won’t allow it.
Currently around 43 per cent of our workforce is Baby Boomers, many of whom are going to retire over the next 15 years, but lack sufficient savings or superannuation to see them through their senior years.
As they leave the workforce they will stop paying tax, many will go on the pension and most will use our public health care system, placing a massive burden on our economy.
Despite the rhetoric from both sides of parliament we have to significantly increase our population to replace the workforce, capture skills and grow the economy. The question then becomes, where do we house these essential new residents?
With most people seeking to live in and around our capital cities, which act as our major employment and services hubs and therefore our most important economic centers, we are clearly going to have to embrace the idea of more medium density housing in this country. And our politicians will need to devise a sustainable population strategy and invest a substantial amount on infrastructure.
Research at Metropole has shown that around 30 per cent of the dwellings needed by 2030 have not been built yet, which means we are in for some interesting times ahead.