4 key takeaways from the census for property investors

As our population continues to grow, so too does our need for more housing.

But not just any housing and not just anywhere will make a good investment property in the future

You’ve often heard me say that demographics drive our property markets. 

In other words, how many of us there are, how we live where we want to live and what we can afford to live in will make a bigger difference to our property markets over the next decade than the short-term ups and downs of interest rates or the vagaries of government policies.

Recently the first set of 2016 census data was released and this contained some interesting surprises and more importantly some important insights for the future of our property markets.

The Australian Bureau of Statistics uses the Census data to recalibrate their population projections and then the government and businesses use these figures to allocate their resources.

Similarly, strategic property investors use the Census data to help understand what types of properties will be in continuous strong demand in the future.

So let’s look at 4 key takeaways that will affect you as a property investor

1. Our population is growing faster than expected.

One of the big surprises in the Census was that there are more people in Australia than we thought and our population is growing faster than estimated

Some Population Statistics:

  • Last year Australia’s annual population growth rate was 1.553% – the fastest population growth in almost three years.
  • In December 2016 Australia’s population was 24,385,625 people (up by 372,805 people over the year) 
  • According to the ABS, over the past year population growth was:
    o    Strongest in Victoria (2.40%), followed by...
    o    ACT (1.71%),
    o    NSW (1.52%),
    o    Queensland (1.46%),
    o    Western Australia (0.66%),
    o    South Australia (0.61%),
    o    Tasmania (0.58%) and
    o    The Northern Territory (0.26%).
  • Population growth in Victoria is 19.4% above the decade average and population in NSW is 9.2% above the decade average.
  • A total of 209,000 people migrated to Australia last year – the biggest annual gain in three years. Still, growth is still down the peak of 315,700 migrants in the year to December 2008.
  • There were 311,000 babies born in the past year – just shy of the record growth of 315,500 babies born in the year to June 2016.
Source: CoreLogic

Source: CoreLogic

2. Migration accounts for around 55% of our population growth

Migration is a big part of our population growth, with almost a million more overseas-born residents registered between 2011 and 2016.

We remain one of the most attractive destinations in the world for migrants, with 26% of our residents born overseas compared to 13% in the UK, 14% in the US, 22% in Canada and 23% in New Zealand. 

The top five places of birth are:

1.       Australia (66.7%, down from 69.8% in 2011),

2.       England (3.9%, down from 4.2%),

3.       New Zealand (steady at 2.2%)

4.       China (2.2%, up from 1.5%) and

5.       India (1.9%, up from 1.4%).

Migration has caused a huge surge in the number of 25-32 year olds helping to slow the ageing of our population and make up for the retiring baby boomers.

These younger migrants are largely coming from Asia, especially China and India.

More migrants in their 20’s and 30’s mean more people in the household formation stage of their lives.

These migrants have uprooted their lives and taken a risk coming here with a driving determination to succeed.

Many will measure their success by where they live and the properties they own.

However, considering their background, many of these young families will be happy to live in apartments close to their work and the CBD rather than looking for accommodation in the outer suburbs. 

Interestingly NSW (40.6%) and Victoria (35.4%) combined accounted for 76.0% of net overseas migration nationally in 2016.

Coming a distant third was Queensland (11.0%) but this means that only 12.9% of net overseas migration flowed to areas outside of the three big east coast states.

Despite all the troubles overseas, one thing is reasonably assured.

Australia will remain a preferred destination for migrants and this is one of the important factors that will shape our property markets in the long term

Looking at interstate migration, Victoria Queensland Tasmania and the A.C.T recorded positive net interstate migration through 2016 while the remaining states and territories experienced a net loss of population through interstate migration.

3. WE LIKE LAND

The Census showed that while 71% of us live in houses (75% in 2006) more and more of us (13%) are living in townhouses (up from 9% 10 years ago).

And despite the surge of apartment construction, only 14% of us are living in apartments which is much the same as 10 years ago), however the proportion of high rise as opposed to lower rise apartments has increased. 

However ten years ago in Sydney, 61.7% of housing stocks were separate houses, and in the latest Census 55.7% of housing stock was separate houses.

If this trend continues by in ten years’ time it is likely that more than half Sydney’s housing stock will be apartments.

Interestingly the average household size today is up a little from the last census.

An average of 2.6 people live in each dwelling (previously 2.57) maybe more of us are sharing or staying at home with mum and dad because of lack of affordability.

But this is still fewer people per household than the 3.4 people in each house during the Baby Boom of 1996.

Why this trend – the change to smaller accommodation?

  • Affordability (or lack of it), especially in Sydney and Melbourne, is certainly a factor in more people living in smaller dwellings, particularly apartments. In Sydney alone, 28.1% live in apartments today, up from 25.8% in 2011.
  • There are a growing number of single people households – one in four, up from one in five in 1991. This reflects a few trends, one of them being our aging population. One in six of us are aged over 65, compared to one in seven in 2011.
  • 38% of families are now couples without children – up from 32% in 1991. Couples without kids don’t need the quarter acre block, so apartments, semis and terraces are ideal. These couples include empty-nesters and young couples either delaying children, or choosing not to have kids at all.

4. WE LIKE LIVING IN BIG CITIES

A key take out from the census is that it’s all about our capital cities

More than two thirds of Australians live in a capital city, and of those, 80% live on the east coast Coast dominates, with eight out of 10 people living in NSW, VIC, QLD and the ACT.

  • Sydney remains Australia’s biggest city with 4.8 million residents, up 9.8% from the last Census in 2011.
  • Melbourne is the fastest growing capital with 4.4 million residents and 12.1% growth since the last census 5 years ago.

Clearly this population growth is underpinning our 2 big property markets and is one of the reasons the predicted oversupply of apartments hasn’t had the big impact some commentators (including me) were expecting.

There is a plenty more interesting data in the Census and since demographics is our destiny, I’ll dig into it and keep you updated.

 

Published in Michael Yardney’s Property Update, 19th July 2017