'Astonishing' population surge to push property prices even higher

Australia now has more people and workers than ever before, and the implications for property prices and interest rates are potentially profound.

Employment and population data released on Thursday (21 March) by the Australian Bureau of Statistics (ABS) has shown that Australia’s population continues to swell rapidly, hitting 26.8 million, while the unemployment rate has taken a shock dip to 3.7 per cent.

With 2.5 per cent more people in the country (in the year to September 2023, according to the latest ABS data), the stress on the housing market has been further exacerbated, underpinning the likelihood of further property prices gains in 2024.

The latest jobless figures make for happy reading for the workforce and will please the federal government, but for those borrowers holding out for an interest rate cut, the 0.4 per cent fall in the unemployment rate should be alarming.

Following the RBA decision on 19 March to keep interest rates on hold, the RBA Governor Michele Bullock made it clear the Board expected the unemployment rate to increase, therefore taking some spending heat out of the economy, reducing inflation and eventually delivering lower interest rates.

The fall in the employment rate will no doubt have the RBA economists reassessing that prospect.

Property prices set to rise

Increased interest rate pressure could exert some resistance on the still buoyant property market but the population growth is more likely to overwhelm that variable.

With 765,900 overseas migration arrivals and 217,100 departures, net overseas migration was 548,800 people during the year ending 30 September 2023.

Western Australia had the fastest growing population, up 3.3 per cent compared with the previous year. This was followed by Victoria, which grew by 2.9 per cent, and Queensland which grew by 2.7 per cent.

Beidar Cho, ABS head of demography, said net overseas migration drove 83 per cent of the annual population growth, while natural increase accounted for the remaining 17 per cent.

The rental crisis is set to worsen with the huge influx of migrants to Australia.

- Kevin Young, Property Club

Damian Collins, Chairman, Westbridge Funds Management, said the new population data was “astonishing”.

“Another 660,000 people equates to another 264,000 more dwellings being needed and we are only completing close to 90,000 short of that number.

“Population growth is still at very high levels in January 2024 so unfortunately, any hope of relief in the housing and rental market is simply not even on the horizon.

“Prices and rents across most capital cities are heading in one direction, and that’s up.”

Perth property is already shaping up to deliver property price growth in 2024 of anywhere between 10 and 20 per cent. As the fastest growing population centre in Australia, price pressure can only increase.

“The numbers in WA paint an even more remarkable picture,” Mr Collins said.

“Population growth is 3.3 per cent per annum and WA grew almost 25,000 people in the three months to 30 September 2023, meaning around 10,000 new dwellings required.

“Completions are averaging about 4,000 to 4,500 a quarter, meaning WA isn't even building half the homes needed.”

The new population level has been reached ten years ahead of expectations.

The Intergenerational Report in 2007 projected that Australia’s population would not reach 26.8 million until 2034/35.

Housing Industry Association Chief Economist, Tim Reardon, said state and local councils cannot be held solely accountable for undersupplying homes, without clear guidance on population growth.

“This is not just a short-term problem emerging due to a spike in population after the pandemic.

“A core component of the Australian government’s initiatives to address the undersupply of housing, including delivering 1.2 million homes, is to invest in improving the quality of data around housing supply.

“An investment by the Australian government in improving the quality of housing data is an important component to addressing this systemic policy failure.

“This should focus on national reporting of land supply to enable performance benchmarking of local councils’ delivery of new homes.

“Good policy decisions require good data.”

Rental crisis not going away any time soon

Over the last decade the median weekly rent collectively being paid by renters throughout Australia has doubled from around $44 billion to $88 billion per year.

Kevin Young, President of Property Club, described the dire rental vacancy situation as a government engineered crisis.

“A decade ago, the median weekly rent for an Australian home was $300 and now it has blown out to over $600 per week.

“With nearly three million private rental properties throughout Australia, it means Australian renters are paying nearly $250 million in rent every day.

“Full-time adult average weekly earnings have only increased during the past ten years by 30 per cent to $1,953 during the last decade, meaning rents have increased at more than three times the level of wage growth.

“It is no wonder the rental crisis in Australia is now crippling millions of low and middle-income renters as they battle to pay rents on top of other cost of living pressures.

“This crisis is set to worsen with a huge influx of migrants to Australia.”

He said the federal government needed to reinstate depreciation benefits associated with owning second-hand properties that were abolished in 2017 and interest-only lending without time limits for property investors.