In the short term, interest rates, unemployment, supply and demand, and market confidence all affect property prices. But in the long term however, property prices are driven more by population growth and affordability.
Based on conservative assumptions of population growth, Economists BIS Shrapnel estimate that Australia’s population will be around 28.3 million people by 2026. This represents about 5.7 million additional Australians living in this country within the next 14 years. A little over half of this number will be immigrants and the balance will be due to net births. Based on the Australian average of 2.5 people per household, this translates to a need for 2.3 million new homes. About 60% of Australians live in our largest five capital cities. Supply and demand in these five cities will keep pushing prices up on well-located properties in the more desirable suburbs.
About 60% of Australians live in our largest five capital cities.
Also Asia represents about half of the world’s population. Because of Australia’s proximity to the Asian region and the demand for our resources we stand to benefit enormously from any growth in this area.
As our population and our wealth as a nation continue to grow, I am confident that Australia has a prosperous future. Our major cities will continue to grow and demand for properties particularly in the inner to middle suburbs will continue to increase. Suburbs which provide good transport, good schools and better infrastructure will benefit the most. This ever growing increase in demand will eventually push housing prices higher in these preferred areas. There is no guarantee prices will go up in all suburbs. If developers in some outer suburbs get carried away and build more housing than there is demand, prices may even fall in these areas.
Now is a good time and an opportunity to buy well located property that will appreciate in value in years to come.
Paul Kounnas