Biggest population surge in years will underpin Sydney and Melbourne property markets

Australia’s population is now almost 24.7 million following its fastest rise in nine years according to recently released ABS figures. This surge in population is expected to boost property markets within Sydney and Melbourne.

Victoria experienced its fastest annual population growth since 1960 with an increase of 2.43%. The New South Wales population rose 1.6% last year, underpinning increased demand for extra infrastructure and housing.

Source: ABS; Corelogic

A lot has to do with migration

The growth of Australia’s population is comprised of natural increase (the number of births minus the number of deaths) and net overseas migration.

As you can see from the following graphic a dramatic increase in net overseas migration was the primary driver of population growth most of which has headed to NSW (mainly Sydney), which has absorbed more than 90,000 immigrants over the past 12 months. Victoria welcomed more than 80,000 new immigrants.

Source: Corelogic

State by state breakdown

Positive population growth occurred in all states and territories in the year ended March 31, 2017.

• New South Wales 7,837,700;
• Victoria 6,290,700;
• Queensland 4,907,600;
• South Australia 1,721,000;
• Western Australia 2,576,000;
• Tasmania 520,100;
• Northern Territory 245,000; and
• Australian Capital Territory 409,100.

Victoria recorded the fastest growth rate of all states and territories at 2.4%. The Northern Territory recorded the slowest growth rate at 0.1%.

But, as they say, there’s more

A recently released report from UBS suggests that population growth only tells half the story.

While the ABS only measures permanent residents, UBS suggests it’s really “people growth”, which takes into account net short-term arrivals for education and employment, that matters.

On that measure, Australia’s “people growth” is 3.5% which is a record high.

Source UBS and Fairfax

The bottom line

Over the last year, decreasing affordability, the Australian Prudential Regulation Authority’s macro prudential controls and changing sentiment stalled the property boom experienced in Sydney and Melbourne. However strong population growth, and in particular the large proportion of new migrants who are usually at the household formation stage of their lives, will underpin the cities’ property markets.