Rapid population growth set to transform property market
In a week where Melbourne's population overtook Sydney's, housing market analyst Michael Matusik looks at the population trends that will shape property markets for years to come.
Real estate is essentially about supply and demand. Demand comes in two forms – the number of people looking to buy an existing property and the underlying need to build more homes.
Population growth is a key factor when determining underlying demand.
In short, the higher the level of population growth the greater the need to build more homes. In general, each time an area’s population increases by about two people there is a need to build another dwelling.
Australia’s population growth has now returned to pre-Covid levels.
If fact, it is currently breaking recent growth records (i.e. within last decade) and if the current uplift in net overseas migration continues, Australia’s annual population growth for calendar 2022 will likely be the highest in the country’s history.
And 2023 – when the official population stats come through – looks like it will hit all previous highs out of the ballpark.
I have included two tables in this article.
The first table shows a few things:
- The annual population growth rate over the next decade is likely to be higher than the past decade: 391,500 per annum between 2011 and 2021 versus an estimated 487,000 each year between 2023 and 2033.
- There is very likely to be a rapid increase in the number of children and the size of the upgrader lifecycle segment over the next ten years. In contrast the size of the market aged over 60 years is projected to grow slower than it has in the past.
If this comes true, a lot more urban infrastructure will be required and the type of housing most needed will change from recent supply trends.
Australia: Past + forecast annual change by lifecycle segment
| Lifecycle segment | Age group | 2011 v 2021 | 2023 v 2033 | ||
|---|---|---|---|---|---|
| Children | Under 16 years | 53,000 | 14% | 114,500 | 23% |
| Young FHB | 17 to 24 years | 13,500 | 3% | 44,500 | 9% |
| Typical FHB | 25 to 39 years | 97,500 | 25% | 81,500 | 17% |
| Upgrader | 40 to 59 years | 64,500 | 16% | 108,000 | 22% |
| Downsizer | 60 to 74 years | 109,500 | 28% | 51,500 | 11% |
| Retired | 75 to 84 years | 39,500 | 10% | 55,000 | 11% |
| Aged | Over 85 years | 14,000 | 4% | 32,000 | 7% |
| Total | 391,500 | 100% | 487,000 | 100% | |
| Total over 60 | 163,000 | 42% | 138,500 | 28% | |
Source: Matusik + ABS. High Series Population Age Projections.
And the second table shows:
- Most of the population growth over the next decade is likely to continue to take place in our capital cities, with most of this growth settling in Sydney, Melbourne, Brisbane and Perth.
- The 2022 Population Statement I think is wrong when it comes to projected annual growth for Melbourne, it is too high and recent trends supports my claim, and Brisbane (and South East Queensland) is too low.
- I think we could easily switch the annual numbers for Melbourne and Brisbane – i.e., circa 133,000 versus 56,000 - as shown in the second table and up the growth rate for the rest of Queensland from about 47,000 to around 60,000 per year.
Australia: Projected distribution of population growth
| Location | Annual change | Distribution |
|---|---|---|
| Capitals | ||
| Sydney | 97,400 | 20% |
| Melbourne | 133,750 | 27% |
| Brisbane | 56,400 | 11% |
| Adelaide | 21,350 | 4% |
| Perth | 49,250 | 10% |
| Hobart | 5,410 | 1% |
| Darwin | 3,515 | 1% |
| Canberra | 11,225 | 2% |
| Total Capitals | 378,300 | 76% |
| Rest of the state/territory | ||
| New South Wales | 34,350 | 6% |
| Victoria | 23,400 | 5% |
| Queensland | 47,350 | 10% |
| South Australia | 2,975 | 1% |
| Western Australia | 6,085 | 1% |
| Tasmania | 3,245 | 1% |
| Northern Territory | 945 | 0% |
| Total regional | 118,350 | 24% |
| Australia | 496,650 | 100% |
Source: Matusik estimates based on Australian Government, 2022 Population Statement using High Series Population Age Projections.
Interestingly, Melbourne this week officially overtook Sydney as the most populous city in Australia after the Australian Bureau of Statistics opted to include the area of Melton, in the city’s north-west fringe, to Melbourne’s population.
It boosted the total number of people in the Melbourne Significant Urban Area to 4,875,400 in June, which is 18,700 more residents than Sydney.
Sydney overtook Melbourne as Australia’s most populous city in 1905 and has held the title since.
But regardless of which is bigger, one thing is for sure and that’s the capitals (and immediate urban areas) are likely to continue to attract most of the population growth.
Like it or not, a bigger Australia here we come!
