Demographics are the data that
describes the composition of a population, such as age, race, gender, income,
migration patterns, and population growth.
These factors are significant drivers of
what types of properties are in demand and how property is priced.
That’s because the demographics of a
population determine not just how many people there are, but how and where they
want to live.
And I’m not really talking about
population growth – it’s actually household formation that is the key here.
And immigration flows into this also.
Australia’s immigration policy of
selecting skilled workers at the family formation stage of their lives is a
significant driving factor for our housing markets.
And Covid has caused a
structural-demographic change that will affect our housing markets moving
Not only that but the pandemic-induced
work-from-home movement has changed the demographics significantly - now, many
workers are able to work from the comfort of their own homes and save on
commuting, which means they need the extra space.
We’ve seen this trend, in fact, with
the sea- and tree-change shift which has occurred over the past 2 years.
The pandemic made people re-evaluate
what they want in a home.
Many were upsized to a larger property,
some moved further away from the city and others relocated entirely to regional
And the importance of the neighborhood
For many it’s all about ‘living
locally’ – having the ability to meet most of your everyday needs within a
20-minute walk, cycle, or local public transport trip of your home.
Future population growth
Australia’s population grew just 0.3%
year on year in Q3 2021, with growth well below the pre-pandemic average of
1.6% given the closed international border from March 2020, with a staged
reopening beginning 1 November 2021.
In terms of heads, this equates to the
population increasing by just 68,900 people compared to 380,000 a year prior to
While our population growth stalled
through the pandemic, immigration levels are expected to get back to pre-Covid
levels by 2023.
This suggests we’ll see a population
growth of about 1.5% or 400,000 per year.
That’s the equivalent of adding a city
the size of Canberra every year!
But the numbers have already started
Since the phased re-opening of the
international border in November 2021 net international arrivals into Australia
have already picked up the pace.
The government noted over one million
people have entered Australia, including more than 130,000 international
students, 70,000 skilled migrants, and 10,000 working holidaymakers.
The government is projecting population
growth to lift to 0.7% in 2021-22 and get to 1.2% in 2022-23.
Underpinning the pick-up is net positive
migration of 41,000 in 2021-22, 180,000 in 2022-23 and 213,000 in 2023-24.
If we believe Australia’s population is
going to keep growing, and it will with a business plan to have close to
40,000,000 people in Australia by the middle of the century, and that our
wealthy nation is going to remain wealthy, this will then underpin long-term
The wealth of the nation
There is a positive relationship
between household income ("real income” after inflation) and housing demand.
Australia’s property prices increased
at a record pace in 2021 with recent data showing that the national median house price surged 25.7% and units by 7.7% year on year.
And it was this price surge, combined
with solid share market gains, which pushed total Aussie household wealth up
another 4.5% in the December quarter of last year to a new all-time high of
That’s a 20.2% increase from just the year
And the same can be seen in per capita
household wealth which rose 3.9% over the quarter to a new record of $556,541
per person - up 19.9% over the year.
The truth is household wealth and
property price increases go hand-in-hand.
You see, Australia’s housing market is
worth $10 trillion, whereas we only have $2.5 trillion of debt.
So it’s clear that the massive wealth
held in property underpins the housing market and this won’t ever fall far
before people start buying again.
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Thursday, 28 July 2022