If you are a property investor or are thinking of investing in property, then it’s vital to understand where population growth will occur and what is anticipated in terms of property price growth in the future. Knowing these factors will allow you to maximize capital growth and to make sound investment decisions.
Expected Population Growth in Australia
Knowing where population growth will occur will allow you to plan where to buy investment property. Population growth means more housing will be needed, and this, in turn, indicates that the demand for homes will be higher. For an investor, this typically means lower vacancy rates.
According to the Australian Bureau of Statistics (ABS) by 2061 all Australian capital cities would have grown significantly in size. Let’s look at the data.
|City||Population in 2012 (million)||Population in 2061 (million)|
Australian Capital City Population Growth by 2035
By 2035, population growth across Australia will be substantial. Melbourne and Sydney are expected to have approximately 6 million residents. To cope with this growth, it’s anticipated that more than 500,000 new homes will be needed in each city.
Given this, it is expected that city centres will no longer be ‘the hub’ of employment. Instead new ‘meta-regions’ will evolve, or employment hubs with other amenities such as hospitals, schools, transport and entertainment facilities.
Low density housing, especially those on train lines will become highly valued. For instance, Beenleigh and Caboolture in Brisbane, Parramatta, Blacktown and Chatswood in Sydney and Box Hill, Dandenong and Frankston in Melbourne.
However, housing industry experts suggest that property investors don’t rely too heavily on ABS data or forecasts as the Bureau’s information can be very broad, especially when estimating growth. In this respect, investors should bear in mind that substantial population growth will occur, but just how many houses will be needed depends on two factors, these being:
1. How many homes get demolished to make way for higher density housing. For instance, rather than a single home, two, three or even more maybe built on a single block.
2. How Australian income grows. If our income grows, then so does our wealth, which, in turn, means that we invest more, buy vacation homes or buy a second home in the city.
What Will Housing Developments Look Like in the Future?
It is expected that more detached homes and multi-storey dwellings, and a number of abodes, such as apartments and townhouses will be common in and around business hubs. At present, 71 percent of homes in Australia are detached, but we will begin to see greater value in smaller homes and medium density housing.
Homes in the future are expected to be close to work, shops, schools and parks, as well as public transport. This means that Australians will look to commute less, and will consider using public transport instead of their own vehicle. In addition, Australians will move from the traditional 3-4 bedroom home on 1200 square metres, to smaller, smarter more compact living that require far less maintenance. These smaller homes will free-up valuable time.
How Will Sydney Property Prices Fair?
It is expected that Sydney property prices will begin to drop over the next 4 years as the mining sector slows down and plans to build more new apartments and dwellings over the next 3 years floods the market with housing. These dwellings will number more than 200,000 properties and this is expected to create an over-abundance of new homes that will decrease the price of established property. This will be due to there being a greater supply of dwellings and not enough economic growth or demand in Australia to support this growth.
There are a number of telltale signs that changes are afoot. Firstly, income growth in Australia is stagnant and with changes to investor lending guidelines by the Australian Prudential Regulation Authority (APRA), property investment is slowing despite lower interest rates. Plus, economic growth and consumer spending are lower than expected.
Secondly, auction clearance rates in Sydney have fallen to the 70 percent mark, when they were sitting at 90 percent mid-2015. Investor growth also dropped from 29.6 percent in April to 16.5 percent in July.
Furthermore, according to Goldman Sachs, homes in Australia are overvalued by 20 percent, whereas Barclay Plc estimate that homes are overinflated by 14 percent. Therefore, it is anticipated that over the coming 12-18 months that the housing market and its prices will begin to correct itself, especially in highly overpriced areas, such as Sydney. Nationally home prices rose by 24 percent over 3 years, whereas prices over the same period rose by 4.6 percent according to CoreLogic data.
Are you seeking to buy an investment property? Then contact eChoice, we can help YOU save more on your home loan.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!