Andrew Bell’s Market Update: The 5 Fundamentals, #4 Population Growth

MARKET WRAP: Issue 7: March 31st 2016

Great news on the economic front with the surprise release of data showing our economic growth for the final quarter of 2015 jumped to 3%. Housing construction was given significant credit for that jump, but of course it was across a broader range of improvements and not just housing.

Perhaps by coincidence there has been a boost in sales activity here on the Gold Coast over the past month. Incredible number of multi-offer situations and in most cases where properties have been listed at or near current values the properties are selling at full price. Now that certainly has been reflected over this really busy Easter period when of course we will have the influx of out-of-town visitors who always boost our sales activity.

The 5 Fundamentals of Real Estate –  #4 Population Growth

Today we are looking at another fundamental that drives the real estate market, and that is population growth. It is often forgotten that this is a major driver of real estate as everybody in the country needs a roof over their head so either we have to buy one for ourselves or we have to have someone else buy one so that we can rent it from them. Population growth is vital to Australia’s economic growth where for the past 30 years most of that economic growth.

where for the past 30 years most of that economic growth has come from increased population numbers where it feeds through to increased demand for retail sales, demand for housing, cars etc.

We need a net migration of 130,000 people per annum just to offset the retiring baby boomers.

What does this mean for Australia?

Australia’s population is just over 24million people and that was due to an increase of 317,000 people last year which is up 1.4%. Increase from births over deaths was 149,000 with births 3% lower and deaths 4% higher than the previous year. Our overseas migration was 168,000 down a significant 11.4%.

Australia’s population growth has slowed to a 10 year low largely due to the falling migration. This decline is certainly appropriate during the transition period in our economy and during the time when we have had higher unemployment however it’s a bit of catch-22 situation because lower population growth also means it will feed through to lower economic growth. I guess it’s a classic situation of being a rock or a hard place.

One benefit from the lower population growth is that it is helping bridge the gap between housing demand and housing supply. However as soon as we start to see unemployment falling back to normal levels, you can be assured that our population growth will pick up through migration.

There is certainly no shortage of people wanting to come to Australia if employment is available so the key to population growth and therefore increased housing demand going forward is unemployment so watch that space.

That’s all for this fortnight,

Kind regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group