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While nothing in life is guaranteed, there are many
reasons to believe the value of well-located real estate
will continue to appreciate over time. Many factors
like interest rates, employment levels, supply and demand, and
market confidence affect a country’s property prices in the short
term; in the long term prices are driven by two main factors:
> population growth, and
> the wealth of the nation.
So let’s examine these two factors in more detail.
¿ LOOK AT WHAT’S HAPPENING TO AUSTRALIA’S POPULATION
Over the past year our population increased by close to
400,000 people, which means we’re growing faster than most
developed nations. This is in part due to natural growth (we’re
making babies faster than people are dying) but mainly due to
Just to put things into perspective, it’s a bit like adding an
extra Canberra to Australia each year.
At the projected rate of growth, our population is likely to
grow by 10 per cent over the next five years, which means
around 2.3 million more people will need somewhere to live.
That’s an awful lot of houses and apartments.
But here’s the game changer... the latest Australian Bureau
of Statistics (ABS) national population growth projections
suggest our population is likely to double in the next 62 years.
This anticipated population increase will have profound effects
on our property markets. Remember it took us more than two
centuries to reach 23 million people and now this is projected
to double in numbers in around 60 years.
Of course these numbers aren’t set in stone as no one really
knows what will happen to government policy on immigration
numbers, however it does seem inevitable that our population
will expand substantially which will have a significant impact
on our property markets. It means we’ll need to build around
eight million additional homes, plus all the shopping centres,
schools, hospitals and infrastructure to support 23 million
more people, while at the same time as somehow managing to
support 17 million more cars on our roads.
Looking at a state level the proportion of population
residing in New South Wales, South Australia, Tasmania and
Northern Territory is projected to fall. At the same time the
proportion is projected to remain static in Victoria and rise
across Queensland, Western Australia and the Australian
The big question is, where will all these people live?
Well, it seems a significant majority are likely to want to live in
our capital cities.
Currently the proportion of Australians living in a capital
city (66.1 per cent) is already high compared to world
standards, however this is projected to increase to 73.4 per
cent by 2061.
These long-term projections bring up some interesting points.
Firstly, in the next 50 years or so, almost three out of every four
Australians will live in a capital city.
Currently 57.3 per cent of Australians live in our four big capital
cities – Sydney, Melbourne, Brisbane or Perth, but if the ABS
population projections pan out, 65.8 per cent of the total national
population will live in our four big capital cities by 2061.
¿ WHICH IS GOING TO BE OUR BIGGEST CITY?
The other interesting forecast is that by 2061 Melbourne will
have a larger population (8,580,556) than Sydney (8,493,740)
and Perth will be home to more people (5,451,406) than
Of course, a lot can happen between now and then, but it may
not even take as long as that because the ABS forecasts that
Perth will overtake Brisbane as the third most populous city in
2028 and Melbourne’s population will overtake Sydney’s number
one spot in 2053.
Boy, will it be interesting to see what our big cities look like in
the future! No doubt this huge increase in population will lead
to significant challenges, including where all these people will
live, how we’ll house them, what infrastructure changes will be
needed and what all this could mean for property values and
affordability in our big cities.
While the edges of our cities will sprawl out further, there’s
little doubt the centres of our cities will become denser with
more of us living in apartments and townhouses.
What does this mean for property? With more of us wanting to
live in the four big cities, our old friend ‘the supply and demand
ratio’ will keep pushing up the value of well-located inner and
middle-ring suburban properties.
Sure, these properties will be unaffordable for some who’ll
remain tenants, but others will be able to afford these higher
priced properties, as I don’t think anyone would argue that
as a nation Australia will become wealthier over the next few
decades. Australia is well positioned to benefit from the growth
of Asia, which represents 50 per cent of the world’s population.
If our politicians play their cards right we stand poised to
capitalise on an economic transformation unparalleled in our
nation’s history. So if, like me, you’re confident that Australia
has a prosperous future and agree that our population is going
to increase significantly and that most of us are going to want
to live in much the same parts of our lucky country, you can
understand why I see a strong long-term future for our capital
city property markets. API
A game changer
Director of Metropole Property Investment Strategists,
www.metropole.com.au . His books are available from
INVESTOR PSYCHOLOGY // MICHAEL YARDNEY
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