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Recent data from the Australian Bureau of Statistics (ABS) has revealed that Australia’s population growth is starting to wane, whilst dwelling construction is simultaneously booming. The good news for those looking to buy is that that this is creating a much closer relationship between housing supply and demand.
The ABS demographic data for December 2015m, which was released last week, showed that Australia’s population is now estimated at 23.9 million people. This is an increase of 326,073 persons over the 2015 calendar year.
Annual population growth has slowed from a peak of 459,504 persons over the 12 months to December 2008.
The slowdown of population growth has caused a decrease in housing demand, but meanwhile dwelling construction is at record highs.
Over the 12 months to December 2015, there was a record-high of 190,072 dwellings constructed across the country.
However, while population growth may be slowing, Australia’s population is still increasing, with majority of growth coming from overseas migration and creating additional demand for housing.
The charts below (Source: CoreLogic, ABS) look at the ratio of population growth to dwelling completions from state to state.
The latest housing and occupancy costs research from the ABS showed that the average household sizes across each state and territory in June 2014 was: 2.6 persons in NSW, Vic, Qld and ACT, 2.4 persons in SA and Tas and 2.7 persons in WA and NT.
As can be seen from the pictured charts, over 2015, the ratios of population growth to dwelling completions have been recorded at: 2.4 in NSW, 1.9 in Vic, 1.6 in Qld, 1.0 in both SA and WA, 0.8 in Tas, 0.4 in NT and 1.3 in ACT.
Based on this data it would seem that each state is building more than it needs, however there are factors that the analysis doesn’t take into account, namely the number of demolitions and whether construction is for short-term accommodation such as a hotel.
Also not all population growth equates to a need in housing e.g. a new home wouldn’t need to be built for a family expecting a new child, however overseas immigration is likely to increase housing demand.
Another factor to consider is the type of dwellings that are being constructed. Units are becoming a much more prominent part of dwelling construction. Units are often smaller and therefore likely to house fewer residents than a detached house which also has an impact on these figures.
This new information may not help provide a definitive answer as to whether too much construction is taking place, but it is clear that as population growth has slowed and dwelling construction has ramped-up there is now a much better relationship between housing supply and demand.
This is highlighted by the fact that in most states and territories there has been a sharp decline in the ratio of population growth to dwelling completions over recent years.
What this means is that housing shortages across the country appear to be diminishing and developers should be cautious when looking at new projects.
The full report can be read at corelogic.com.au.