Australia's population hits new high, but where is the growth occurring?

On Saturday arvo, in a small but significant landmark for Australia, with the population increasing by one person approximately every 77 seconds, the Aussie population clock will quietly tick past 23,500,000.

Property investors tend to keep an eye on this kind of stuff because population growth and demographic shifts are vitally important to how we are developing as a nation.

While there may be no direct link between the growth in a population and property prices per se, over the long run it is crucial to understand how demographics are shifting.

And, more than that, whether the population is growing or not makes all the difference to city housing markets. 

Where populations are static or falling, this comes with an inherent risk of protracted declines in price, such as experienced in certain other parts of the world. 

Australia is growing its population at a very sharp pace, so these little landmarks tend to sneak up on us, and it is important that the building of infrastructure and jobs growth keep pace with the net migration and natural population increase:

Steady states?

As I tend to look at periodically, the population growth in Australia is a combination of natural increase and net migration, and, as you might expect, it does not occur evenly across the country.

Over the long run, in particular, four states have been growing their populations at quite a bounding pace.

While there may be no direct link between the growth in a population and property prices per se, over the long run it is crucial to understand how demographics are shifting.

Since 1981 for example, New South Wales has increased its population from 5.2 million to above 7.4 million - a colossal increase - while Victoria is not far behind, having raced from below 4 million to above 5.75 million.

Queensland and Western Australia have also shown very strong population growth as you can see in the chart below, which details the make-up of Australia's population by state over the long haul.

On the other hand, even over the very long term South Australia has added relatively few persons to its population, increasing from a bit above 1.3 million to less than 1.7 million, a total increase of only around 350,000.

The other states are minnows by comparison, although artificial and geographical supply constraints in Canberra and Darwin have seen dwelling prices rise sharply in some cases:

It was interesting to read in an article this week, Steve McKnight offering the following advice:

"The generic growth gives investors a blueprint of where to target, namely Melbourne, Sydney, Perth and Brisbane in that order, and where not to, namely: Tasmania, NT, ACT and SA (in that order)." 

The total population growth figures released by the ABS tend to reveal similar trends each quarter:

McKnight believes that because the state of Victoria has the highest total population growth Melbourne is the best city to invest in.

Property price movements are not only about demand of course, you have to consider supply too.

Personally, I prefer Sydney because of its geographical constraints; the city can't readily spread due to the respective surrounding mountains, national parks and the ocean.

As an obvious aside, while it's good to see a city with very strong population growth, we don't look for suburbs with the highest density of population.

Not at all in fact - we look for prime location suburbs where the population is all but fixed due to a necessary lack of new supply, where there are height restrictions on new building.

In Sydney, for example, we've recently been buying in some of the lower north shore suburbs where the population growth within the individual suburbs from Census to Census has been all but negligible. Fully built out and height restrictions on new development. 

There are other factors to consider too, of course, including relative affordability.

Trees surely don't grow to the sky, so at various points in the cycle investors will consider Brisbane and Perth too.

The other states have feeble population growth, and generally speaking, therefore might be considered riskier propositions.

You can visit AllenWargent property buyers (London, Sydney) or Pete's blog.

His new book 'Four Green Houses and a Red Hotel' is out now.