“Melbourne to become Australia’s largest city; it is likely to have a significant infrastructure boom which will strengthen the economy whilst the strong population growth soundly underpins the value of property markets in the medium to long term future.”
Mr Reardon told Williams Media “there is still very strong population growth in Melbourne at 2.3 per cent and Sydney at 1.6 per cent, at least double what the average is in the Organisation for Economic Co-operation and Development member countries.”
“While we are still seeing house price declines (in certain locations*) it will be relatively short lived with such strong population growth. Those house price declines will turn around fairly quickly, and we will see more sustainable house price growth in the future.”
“People should be looking at population growth as an indicator of house prices.”
“A good indicator of strong population growth is areas that have economic growth and employment opportunities over the course of the coming decade,” Mr Reardon continued.
“This includes expenditure by government through schools, hospitals, new industrial developments.”
Immense population increase combined with a lack of suitable new dwellings for families is likely to create strong long-term growth in house prices – raising fears this could spark an ‘affordability’ crisis.
Data from the Australian Bureau of Statistics (ABS) shows Melbourne is Australia’s fastest growing capital city, recording its highest ever net annual population increase of 125,400 with a very high growth rate of 2.7 per cent in the years 2016-17.
This has led demographer Bernard Salt to predict Melbourne’s population will shoot past five million by 2021, and past eight million by 2050. Mr Salt also anticipates Melbourne could eclipse Sydney as the most populated capital of Australia by 2030.
A report by the Victorian state government forecasts the city will need 1.6 million new homes over the next 35 years to account for this. We know an under-supply of stock hikes up house prices, evident in Melbourne’s outer suburbs where the demand by families for house and land continues to exceed supply.
Areas with wages growth will experience stronger capital growth due to affordability, these areas are primarily around the Melbourne CBD which includes suburbs up to around 15km from the CBD. Lower wage earners will be forced to purchase further out in locations which match their budget to buy or rent.
The median price for houses in Melbourne is $836,800 and for units $554,571 – but the estimated price of a 105m² unit, a size suitable for most families, sits at around $613,593 – a price just out of reach for the average homeowner.
Shane Garrett, Senior Economist for the Housing Industry Association quoted the building boom, an increase in infrastructure projects and a growing services sector are to thank for the city’s booming population.
“The remarkable performance of Melbourne demonstrates how well the circle of job creation, population growth and new home building can boost an economy, house prices and rental vacancies are feeling the effects of Victoria’s strong population growth.” said Mr Garrett.
“The low vacancy rate is reflective of the fact that more people are renting now than ever before: in 2001, 23 per cent of the Australian population lived in rental housing and that figure has climbed to 28 per cent today,” Mr King said.
In particular an under-supply of suitable dwellings for families looking for larger dwellings, has been a contributing factor to housing affordability on the back of demand driving property values in areas which were more affordable just a year ago. A family simply cannot fit into a two or 3 bedroom inner suburb apartment and are thus relocating further out into new estates offering House and Land products at an affordable amount and a good deal cheaper than a 3 bed inner suburb apartment. For these purchasers this is a no brainer.
The allocation of significant funding to infrastructure upgrades in many urban and regional areas in the 2018 Federal Budget will have a positive impact on dwelling supply. Buyers need to know where to look. There are many areas that are still within reach for first home buyers.
Quality and well-planned infrastructure will be integral to the future of Victoria’s property market.
Regional Victoria is now the strongest market in Australian Real Estate with the strongest price growth across the nation
This is on the back of strong population growth, new employment opportunities, affordability, lifestyle and increased demand for homes to own or rent.