Australian property values are a ‘hot topic’ and one of the most common points discussed amongst home buyers. There are a number of factors that dictate to property value, such as location, the condition of a property, economic growth, and supply and demand.
Supply and demand, however, is often misunderstood. This is why we are going to look closely at this factor, as it is directly related to population growth and property values.
What is Supply and Demand?
Simply put, supply is the number of properties that are for sale, and demand is the number of people who are looking to buy a property. If there are more people looking to buy than there are homes for sale, then demand is greater than supply, which pushes home prices up. This is what is referred to as a seller’s market. However, if there are more homes for sale than people looking to buy, then supply is greater than demand and property prices tend to go down. This is referred to as a buyer’s market.
What Happens to the Housing Market When Population Growth Occurs?
When migration levels increase and more people come to an area, either from other states or regional areas, or from other countries, then typically the demand for housing increases. This, in turn, tends to push property prices up in both capital value and in rental value. This occurs because more people need accommodation and they’re willing to pay more for it.
When population growth is strong and long-lasting this encourages development to occur and new housing is built to cope with the increase in demand. To understand this better, let’s look at a specific town in Australia to see how population growth affects property value.
Population Growth in Emerald, Queensland and Property Value
Emerald, a town in Queensland is situated in a mining region. Before mining began, this town had a population of approximately 12,000 people. Today, the population is estimated to be in the vicinity of 19,000, and anticipated to reach 30,000 by the year 2030. As a result of the population growth, property prices in the township have increased. Real estate professionals estimate that the capital growth of property values has risen by approximately 13 percent per annum. The median prices of homes in the township in 2007 was around $360,000. Today, the median is approximately $450,000.
Therefore, it can be said that property value typically increases due to the development of an area. Where new housing is built due to demand, which extends the boundaries of a township or city. This, in turn, then makes properties that were once situated in outer suburbs, become situated in inner suburbs, which have a higher demand than those suburbs further out. This is because they are closer to amenities and the central business district.
Do you want to know more about property values and investment? If so, contact eChoice today, we can help you understand how population growth affects property values.
Written by eChoice