Housing demand set to increase on the back of higher population growth

22,771,649. That’s the estimated total of Australia’s population.  According to the Australian Bureau of Statistics there is one birth every 1 minute and 46 seconds and an Australian dies every 3 minutes and 40 seconds.  Every 2 minutes and 44 seconds there is another international migrant crossing the Australian border.  Overall the Australian population increases by one person every 1 minute and 31 seconds.

Population and more importantly, the change in population, is intrinsically linked with housing demand.  To put it simply, more people means more homes.

Unfortunately, for such an important indicator, we only see quarterly updates of Australia’s population estimates at a macro level (ie national and state).  More geographically granular updates are released only annually.  Additionally, there is a long time lag for updating population data.   The official estimates at a state and national level are currently up to date as at March 2011 with the June quarter estimates due to be released on December 19th.

As can be seen from the graph below, total population growth has eased since peaking back in the March quarter of 2008 (+0.63% over the quarter – note that there is some seasonality in population growth and Q1 typically shows a higher rate of growth than other periods).  Part of the slow down can be attributed to the migration cuts brought in by the Federal Labor Government (the migration intake quota was virtually halved).  Additionally we have seen a swift rise in the number of permanent and long term departures from Australia which has only recently started to reverse.

In fact, based on the more timely migration data released by the ABS (migration data is released monthly, about a month and a half in arrears – so quite a timely data set in comparison with the demographic statistics report which is quarterly and released about six months in arrears) we are now seeing an ongoing trend of higher net migration rates; fewer residents leaving and more new or returning residents arriving.  The migration data is also quite seasonal, with spikes being recorded during February and July each year.

On a rolling annual basis, the September results for net migration were the highest since August 2010.  This is likely the result of the improved migration intake, with the Federal Budget announcing a 10.5% uplift in the skilled migrant intake and a 7.4% increase in the number of migrant families.   The trend of fewer long term and permanent resident departures is also helping to drive the net migration figures upwards.

Almost without doubt, as the ABS progressively release the new demographic data for the June and September quarters of this year we will see an improvement in population growth figures.  Theoretically the uplift in population growth should translate to greater housing demand; so we should start seeing that reflected in some improved dwelling approval and commencement figures.  That will be a welcome development by the residential building sector where the latest construction data from the ABS showed the value of residential construction was down 3.9% over the year.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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4 Responses to Housing demand set to increase on the back of higher population growth

  1. Duncan November 25, 2011 at 1:06 pm #

    Wonder why there is so many foreclosure sales, and 1900 units advertised for rent in Melbourne.

    • Tim Lawless November 25, 2011 at 1:49 pm #

      Interestingly Melbourne’s population growth over the year to March has been virtually the same as Sydney’s, around 80,000, however there have been more than double the number dwelling commencements and blocks of land sold across Melbourne compared with Sydney The addition of new housing supply has been quite high which can be seen in Melbourne’s higher vacancy rates, lower rental growth and what now seems to be a rapid easing in prices.

  2. Richard November 27, 2011 at 1:27 pm #

    population figures make more sense than meaningless medians. They show prices on the rise around the country when everyone knows the market has been falling about 1-1.5% a month for the past 2 years.
    If the A$ was to fall to 80c we would get a lot more migrants bringing their money over.
    Now the RBA have finally eased rates the market may recover slightly.
    Not that Sydney & Melbourne have to worry unless you are trying to buy.

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