Continued strong population growth will drive demand for housing, infrastructure and social assets such as schools and hospitals in east-coast markets, a leading property industry economist says.
In his latest analysis, Turner & Townsend senior economist Gary Emmett said demand across eastern states for housing, retail, infrastructure and social assets would be underpinned by continued high-levels of population growth in Victoria and New South Wales as well as an uptick in population growth in Queensland as well as strong growth in employment opportunities.
“During this decade population growth in New South Wales and Victoria has powered ahead, fuelled by overseas arrivals,” Emmett said.
“Queensland’s population growth has slowed down, but is starting to increase again in 2017 driven by interstate migration.”
Emmett says this will underpin healthy levels of demand for construction across housing, schools, hospitals, shopping centres, transport and infrastructure.
Notwithstanding ongoing concern about a possible housing oversupply, population growth throughout eastern states is driving high levels of underlying housing demand.
Victoria is leading the way, with the population having risen by a whopping 138,559 or 2.4 percent over the year to March.
Assuming an average household size of 2.6, this alone would imply demand for 53,291 new dwellings per year even before adding in new home demand associated with the impact of new household formation as young people move out of home – almost by itself being sufficient to absorb the average 56,008 new dwellings which have been completed throughout the state on average over the past five years.\
Also going strong is New South Wales, which added 120,85 or 1.4 percent to its population over the twelve months to March.
Again, this in itself would imply a level of housing demand equivalent to 46,417 new dwellings per annum – almost by itself absorbing the 47,328 average dwellings being completed each year (average past five years).
Having dropped back in recent years following the mining boom, Queensland’s population rose again by 1.4 percent or 74,452.
According to Emmett, population growth in eastern states has largely been driven by net overseas migrants, who in and of themselves pushed up the combined population of Victoria and New South Wales by 177,000 last year.
Queensland, meanwhile, was starting to benefit from net interstate migration amid the relative affordability of its homes.
With a median house value ($515,000) which is half that of Sydney ($1.020 million), Brisbane was fast emerging as a prospect for baby boomers who are approaching retirement and baby boomers who are priced out of the market in Sydney.
This will be further helped by a recovery in employment growth, whereby job gains of 96,300 over the past year will further encourage migrants to Queensland.
Meanwhile, both New South Wales and Victoria have benefited from strong employment growth over recent years.
With population growth in these states art record levels, Emmett said pent-up demand for housing remains strong.
“The Queensland construction sector with its oversupply of inner city Brisbane apartments would welcome an increase in both interstate and overseas migrants,” Emmett said.
“However, as population growth in Victoria and Sydney remains at record levels, pent up demand for construction looks set to grow fastest in these locations.”