Population growth compounding our undersupply problems

Currently Australia has a population of some 23,640,000 and we are rapidly heading towards the 24 million mark.

In the most recent population update issued by the Australian Bureau of Statistics (ABS) for the March quarter 2014 there are some interesting facts and some shifting fortunes for various Australian states. Some of the changes directly reflect the shifting strengths of the associated local real estate market, but there are many other influences the population is having on demand for housing.

Our march towards a population of 24 million is being fuelled by some key facts; our birth-rate is healthy while our death-rate is much lower. According to the ABS a new birth takes place every one minute and 43 seconds, while a death occurs every three minutes and 31 seconds. So births are well ahead. There is one new international migration into Australia every two minutes and five seconds, and we have the net result adding one new person to the local population every one minute and 17 seconds.  Our population growth rate is at around 1.8% which is very high by international standards; therefore we lead the OECD ranks.

It’s little wonder that we see so many new baby wear shops in our local shopping centres, and also continued strong demand for housing.

International Migration

While our natural rate of population growth is impressive, it only accounts for 40% of overall growth, with 60% coming from international migration to Australia. The impact is also apparent in NSW and Victoria, the two states currently leading in population gains.

The March Quarter ABS figures show that in NSW the population increased by 114,500 with 67% of that coming from net overseas migration. In Victoria the population grew by 108,800 with migration making a 57% contribution and we know that these two states also have the most demand for housing and the most robust prices. Clearly the arrival of one new international migrant almost every two minutes is having a major impact on growth and creates more immediate demand for housing than the numbers of new born babies.

Interstate Migration Shows Major Shifts

While WA still leads in the rate of growth at 2.5%, that is well down from the rate of 3.5% just 12 months ago, as momentum is shifting towards the big states like NSW and with its current population at 7,500,600 it’s easy to see how important that state and Victoria and their local economies are as we move out of the mining boom. The ABS figures go further and show how population trends have changed over the last five years.

In 2009 some 12,300 residents left NSW to move to Queensland, in 2014 that figure had fallen to 4,800.  That’s a very big shift. More people are arriving and staying in NSW where housing supply is at its most critical. At the same time growth has slowed in Queensland and WA. In fact NSW has recorded its lowest interstate migration of population in 30 years and Victoria has had its highest gains on interstate migration to that state on record. Queensland has seen its lowest rate of gain, dropping 65% in five years.

We are seeing some changes that are reversing decade-long trends and the different population pressures in each state are reflected in local demand for housing. New migrants and expanded families need homes and both are having a major impact on our local real estate markets and possibly compounding the problems of undersupply.