DEMOGRAPHICS is central to the Australian property industry. More so, I would suggest, than to the property industry in other countries. And the reason is the Australian immigration program.
For almost 70 years since the end of WWII, the demand for residential and other property has been underpinned by a strong migration program. More people translates into greater demand for property. Which is why the property and related industries should always be monitoring aggregate shifts in demand through population growth.
In December the Australian Bureau of Statistics will release national and state population estimates for the June quarter allowing assessments to be made about growth rates for the 2014 financial year. The key question that follows the publication of these figures is this: is population growth trending up or down or is it tracking steady?
Drawing on three full quarters of data I have estimated population growth for the entire 2014 financial year and I have made comparisons with previous years. My assessment might be proved wrong when the final quarter’s data is released in December, but I doubt it. The reason why I deem this to be of sufficient importance to warrant a column is that there has been a fundamental shift in the momentum of population growth at both the national and state level.
This shift took place, coincidentally I believe, about the time of the federal election last year. The national growth rate is slowing; this must have deleterious impact on the short-term demand for housing. I suppose this is good news if you are a believer in the calamity of over-population. But it is bad news if you are a large-scale provider of product and/or services to the property industry. It is also bad news for states where employment is contracting in mining and manufacturing industries and where building and construction was the one bright spot.
At the national level, the total population added over the year to June 2014 was 385,000, down about 4 per cent on the previous year’s growth of 401,000. Australia’s population growth rate peaked in the 2009 financial year at 456,000; this was about the time that the ABS recast its 2051 view of the Australian population from 28 million to 36 million, prompting the Big Australia debates.
Immediately after Kevin Rudd’s famous “I believe in a Big Australia” comment in October 2009, overseas migration wound back. This pushed net growth down to 359,000 in the 2010 financial year and to 335,000 in the 2011 financial year. In just two years a policy shift reduced this nation’s growth rate by a quarter.
But then in 2012 and 2013 the growth rate recovered, driving up demand for housing at a time when employment in other sectors was diminishing. This is why these figures are so important; they go to the heart of the momentum of demand for housing and for jobs in the building and construction industry.
But now and especially since the 2013 September quarter the momentum of growth has subsided, since the recovery from the Big Australia pullback. Sure, population growth is a driver of economic demand but this key driver has been weakening for a year.
The scale-back in the growth rate is modest to date — just 4 per cent over the previous year — but is important because it signals a shift in momentum. Instead of rising demand for housing there is subsiding demand. Quarterly population estimates to be released in December and in March next year will be critical to confirming the short-term momentum of housing demand. But this is only part of the story. At the state level the 2014 demographic shifts have been quite dramatic and varied.
In Western Australia, net overseas migration dropped 32 per cent from 53,000 to 36,000 over the 12 months to June 2014. In Queensland, net overseas migration dropped 20 per cent from 41,000 to 33,000 over the same period. Net interstate migration to Queensland remains modest at 5000 in the 2014 financial year, down from 35,000 a decade earlier. The demand for labour in the resource states is clearly diminishing.
Oddly and despite retrenchments and political uncertainty, all components of population growth in South Australia appear to have held steady for three years. Tasmania’s net growth position continues to improve with progressively fewer locals leaving for the mainland. In the ACT there has been an upswing in interstate migration loss since the federal election, but for those Canberrans who are choosing to remain they do seem to be reproducing just a touch more enthusiastically since natural increase is on the up.
The demography of the Northern Territory is always volatile. Over the last 12 months more people have left the Territory for other states and fewer have arrived from overseas. Short-term demand for housing in the Territory, in the ACT, in Queensland and in Western Australia is subsiding.
The big surprises are in bigger states. Despite less growth at the national level over the 2014 financial year, the number of people added to NSW has jumped to 118,000, up from 103,000 the previous year. The same applies to Victoria: net growth of 111,000 is up from 104,000 the previous year. And in both cases growth is being driven not from natural increase (which is subsiding), but from net overseas migration.
Australia is still an attractive proposition to overseas migrants (although less so to New Zealanders these days), but the attraction is more to Sydney and Melbourne than to the remote mining camps of Queensland and Western Australia.
Taking all of this into consideration it is not surprising that the Sydney and Melbourne housing markets have been rising. There is a surging demographic momentum in these markets being driven by rising overseas (non-Kiwi) migration. Demand is falling in the resource states, but off a high base. I suspect that Sydney and Melbourne will remain property hot spots for as long as the momentum of overseas migration continues to rise in these cities. And this in turn comes back to the relative performance of the Australian economy compared to others in the region. Because once domestic or alternative economies start to perform better, we Australians don’t look anywhere near as attractive as we did during the depths of the global financial crisis.
Sources : www.theaustralian.com.au