Rethinking the Role of Population Growth in Australia’s Property Market

As Australia approaches another election, housing affordability emerges as a crucial issue. The federal opposition’s proposal to slash the nation’s migration intake has sparked debates about the impact of population growth on property prices. However, recent analyses challenge this perspective, suggesting that other factors play more significant roles in shaping the real estate landscape.

Caroline Riches, in her insightful article “Why population growth isn’t to blame for rising property prices,” explores this complex relationship. Drawing on data from Propertyology, Riches highlights the minimal influence of population growth on property markets. Simon Pressley, head of research at Propertyology, emphasizes, “People think population growth is the most dominant factor influencing property market performance, but it’s actually a very small one.”

Pressley’s analysis of 120 cities and municipalities reveals that high population growth does not necessarily correlate with real estate capital growth. For instance, Mandurah in Western Australia, despite being the fastest-growing area for 14 years, saw no change in median house prices. Similarly, regions like Victoria’s Surf Coast and Queensland’s Sunshine Coast experienced significant population increases with only modest price changes.

On the other hand, PropTrack senior economist Paul Ryan suggests that the real drivers of property price growth include economic performance, housing supply, and interest rates. “Sydney has the perennial appeal of being the biggest, most cosmopolitan part of Australia where wages are markedly higher than elsewhere and that has an impact on prices,” says Ryan. This explains why areas like Baulkham Hills and Hawkesbury in Greater Sydney saw property prices soar by 177% since 2010, despite moderate population growth.

The current scenario underscores a critical misinterpretation in policy-making and public perception—blaming population growth for rising housing costs might be an oversimplification of a more intricate economic puzzle. As Elin Charles-Edwards, an associate professor of human geography at the University of Queensland, points out, factors such as household formation and changing living arrangements also significantly influence housing demand.

In light of these insights, it appears that the debate over housing affordability in Australia requires a more nuanced understanding of the various elements at play. As the nation moves forward, it will be essential to consider a broader range of factors to address the challenges of the property market effectively.

References:

https://www.realestate.com.au/news/why-population-growth-isnt-to-blame-for-rising-property-prices/