Issue 20 | Thursday August 27th 2020 | How will negligible population growth impact real estate?
Hi, Andrew Bell here with you in our final weeks of winter. I can honestly say it is the best winter in living memory here on the Gold Coast. Gorgeous sunny days, a little wisp of cooler air in the mornings but warming to just perfect days. In fact, we do need some rain to boost our dam levels and water our public areas in the lead up to spring.
As my regular viewers are aware, there are five fundamentals that I keep a very close eye on. One of those 5, population growth, is never high on our consciousness but indeed has been a crucial component not only on the real estate market but for our national economy. Increased demand year on year for what we produce, and of course increased demand annually for what we build and for what is for sale in the real estate world.
In 2019 our population grew by 349,800 people, or 1.4%, and approximately 210,000 or 60.2% of that growth was a result of immigration. Housing construction is one of the key drivers of our economy, but we can’t keep building new homes if we don’t have more humans to occupy them, and so immigration has been critical to drive that economic activity. A good percentage of that population growth ends up being people who buy re-sale properties.
As a result of COVID-19, our borders have been closed. Immigration is on hold. Our Prime Minister said that immigration dropped by at least 85% but current figures are suggesting it is around 95%. This has an immediate effect on real estate, but it will also have an effect for many years to come; not only because the borders are closed but even when they are open we won’t be bringing in anywhere near the same number of new Australians to the country because until unemployment has been reduced significantly, which will take years, we won’t be adding new people to that unemployment list.
This huge drop in demand for housing will have an impact, yet there is an unmeasured counterbalance that we must keep an eye on. Again, as a result of COVID-19, over 300,000 Australians living overseas have returned to Australia to be safer and to be with their families. What we do not know is how many of those will return to where they have been living as we free ourselves of COVID-19 and people feel safe to be living overseas again. Undoubtedly a percentage will decide to stay and whilst we don’t expect that to be a complete counterbalance to the drop in migration, it will undoubtedly give us some relief from the significant hit in reduced buyer demand.
A report just out on the very impact I have referred to today suggests that the previous population growth trajectory that was forecast will drop by 1.4 million people over the next 20 years. That is a lot of potential real estate buyers and will cause a significant redrafting of our housing needs, and whilst reducing demand for existing constructed homes, there will also be an impact on the new home build industry which of course will therefore impact on our economy.
Undoubtedly one of the many lasting effects of COVID-19 that we will learn more and more about as years go by.
When I am with you in a fortnights time we will be into spring. Let’s really support each other as we work to get our economy back up and running. We certainly have had our share of some major mistakes around managing COVID-19, but all in all we are one of the standout countries in the world and we should be extremely proud of how Australians and our amazing health system have managed us through this once in a hundred year pandemic.
Warm Regards, Andrew Bell
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group