Pete Wargent says there is a re-bound in population growth and he looks at what this means for our property markets with a special focus on the Victorian market.
Kevin: Apparently, there has been a rebound in population growth around Australia. What does that mean to our markets? Joining me to bring us the news on that and also its likely impact, Pete Wargent joins me.
Pete: Hi, Kevin.
Kevin: Tell me the news. What’s happening?
Pete: The rebound, as you mentioned, in Australia’s population growth in the last quarter of the year: the fourth quarter is generally a slower quarter for population growth anyway because of the Christmas break, but we saw a decent rebound up to more than 70,000 people in that quarter, which was actually a good increase on the 66,000 we had last year.
I think over the last six months now, we’ve seen that population growth starting to rebound, which is obviously a net positive for the property markets.
Kevin: This is into Queensland, Pete? Is it?
Pete: There are a few different trends going on. At the headline level, Australia’s population growth has picked up again. It was above 325,000 in 2015, so that’s a bit of a rebound over the last six months. But as you mentioned, there are a few different sub-trends going on there.
The strongest population growth is actually into Melbourne. That’s partly net overseas migration, but there has also been record interstate migration into Victoria, which is not something that historically we’ve ever really seen in Australia. That was unprecedented in the December quarter – more than 4000 people moving from other states into Victoria, so they’re following the jobs.
The other noticeable trend from an interstate perspective was this cyclical move into Queensland, which we do see historically: people moving away from Sydney as it becomes more expensive. Interstate migration into Queensland was at its highest level in eight years, so that’s really starting to gather some pace now.
Kevin: Is this into South East Queensland, or is it right across the state?
Pete: It’s largely into South East Queensland. Brisbane is obviously one of the growing markets being the capital city, but also some of those coastal regions. The Gold Coast and Sunshine Coast, those are areas that attract people to live – lifestyle locations – but also with employment opportunities too.
Kevin: People moving into Melbourne, I think you mentioned there that it’s largely to do with employment. Would it also have to do with property prices in Sydney? Is that largely where they’re coming from?
Pete: It’s difficult to narrow it down completely accurately from the official figures. I would say that there’s definitely a drain of people now away from South Australia and away from Western Australia as the mining boom comes off. I think, to some extent, there’s a bit of a brain drain happening from Adelaide, and the population growth rates in South Australia have reflected that and continued to slide.
Melbourne is benefiting from that to some extent, but also population growth in Western Australia – which was the strongest in the nation – is now actually seeing a net outflow towards other states. I think Melbourne is picking up a lot of the benefit from those areas.
Kevin: If Melbourne is picking up the bulk of that benefit, is it likely also to flow to some of the regional areas in Victoria, do you think?
Pete: The most recent figure suggests not so much. Melbourne and Geelong have mopped up the overwhelming bulk of population growth in Victoria. Melbourne’s population is growing at an astonishing pace – faster than 90,000 per annum – and Geelong has picked up about a few thousand, too.
Regional population growth at the moment, at least in Victoria, is not so strong. New South Wales, though, some of those regional economies, the Hunter Valley, Newcastle, and down in Illawara, they’re starting to creating some jobs now so they could see some population outflow from Sydney.
Kevin: That South Australian market’s struggling, isn’t it? You feel that they’re just getting on their feet and then all of a sudden, they cop another blow like this. It’s the same, I guess, with Western Australia, Pete.
Pete: Yes, to some extent, it’s reflective. Obviously, a lack of employment growth is often then reflected in demographic trends. Some of the receivership in Whyalla is a bit of a blow for the state. We’ve been talking about the [4:02 inaudible] closure for years now, but cumulatively, these little blows haven’t really helped.
But that said, the property market has been picking up a bit. People are finding things much more affordable down there than they are in Sydney, so there are some hidden benefits, but it would be really great for Adelaide if we could start to create some employment opportunities.
Kevin: Out of these figures, just in summing up, what do you see as the opportunities for property investors?
Pete: Just looking at the headline numbers, the population growth into Sydney and Melbourne is enormous, so there’s a higher share now in the history of Australia – certainly in modern history. There’s nearly two-thirds of the population growth now going to the two most populous states.
To some extent, you could say that with the centralizing population, there are opportunities there in the capital cities. I would just caution, though, that apartment construction rates are pretty high, particularly in Melbourne but also in parts of Sydney, too, so you want to be a bit careful about the type of property that you buy.
To some extent, Brisbane is following a similar trend. There are a lot of apartments being constructed around the inner city area, a lot of them sold offshore. I’d be a bit disinclined to look at some of their new stock at the moment personally, a lot of supply coming online.
Kevin: Pete Wargent, thanks for your time.
Pete: My pleasure, Kevin.