What everyone ought to know about our property markets

There’s finally some good news for property investors.

We are now seeing consensus from the two major property research houses, RPData and Australian Property Monitors, that house prices have risen over the last few months, responding to the recent interest rate cuts.

And, recently, RBA governor Glenn Stevens confirmed our economy is in good shape and able to weather almost anything the world’s financial markets will throw at us. At the same time, he reassured us that our markets are not going to crash.

Yet some in the blogosphere are still predicting our property markets are going to crash.

Of course, forecasting the future of something as complex as the nation’s various property markets is difficult, as there are all manner of variables at play.

Many factors affect a country’s property prices in the short term, including things like interest rates, supply and demand and market confidence. But the long-term prospects for Australian property are easier to forecast because over the long-term property prices are really driven by two main factors: population growth and the wealth of the nation.

In Australia, strong future population growth is a given (as I’ll explain in a moment) and, as a matter of fact, so is our increasing wealth. And this is positive news for the continuing growth of property prices.

Let’s look at these in more detail.

What’s happening to Australia’s population?

Australia’s population is estimated to be around 22,900,000. While population growth has eased since peaking back in 2008, our population increased by over 300,000 persons last year, which means we’re still growing faster than most developed nations.

This is in part due to natural growth (we’re making more babies faster than people are dying) and that we still have strong overseas migration.

The fact is Australia’s population will keep getting bigger under every realistic scenario according to a report by the Centre for Independent Studies, and no matter what politicians do, population growth is going to happen. This is a certainty.