Our property markets are all about people and it's our population growth that will drive the next property cycle.

Both home owners and property investors should be pleased to know that Australia recorded its largest annual population increase ever, according to figures recently released by the Australian Bureau of Statistics.

Australia grew by an estimated 307,100 people for the year ended March 2007, the largest increase since record keeping began.
 
The increase gave Australia an annual growth rate of 1.5% (the highest rate since 1990), and brings the population to an estimated 20.9 million.
 
Net overseas migration contributed 54% (162,600 people) to this growth, which was more than the natural increase of 46% (138,100 people).
 
As the table below shows Queensland again recorded the highest increase in numbers followed by Victoria.

According to the latest estimates from BIS Shrapnel Australia's housing needs have risen to a new record high of 182,000 new dwellings per annum, substantially above the 151,000 new dwellings actually commenced in 2006/07.

BIS Shrapnel forecasts Australia's population gain from net overseas migration will reach 185,000 persons in 2007/08 -- the highest annual inflow on record. This inflow comprises both permanent migrants and long-term visitors (workers and students).

During the next five years, more than half of Australia's population increase will come from overseas migration (up from 39 per cent during the 1990's).  This will mean an increased demand for both rental and owner occupier housing and the current rate of residential construction is substantially below underlying demand.

There were 151,000 national dwelling commencements in 2006/07, and BIS Shrapnel forecasts a similar level of commencements for 2007/08 contributing to a greater deficiency of dwellings. The deficiency is forecast to reach about 100,000 dwellings by June 2008, which would equate to eight months of construction.

BIS Shrapnel forecasts the Australian Bureau of Statistics (ABS) rental index will show an increase of 8.4 per cent over the year to June 2008. 

Eventually, BIS Shrapnel expects the rise in rentals will be a factor behind a recovery in dwelling construction from 2009, as a rising number of tenants elect to become owner-occupiers, and growth in rentals attract investors back to the market.

With historically low vacancy rates and our rate of new home construction not keeping up with demand, all this points to strong property markets in 2008.

Looking at how the long term growth pans out, a new Population Report by KPMG shows that Melbourne is closing the population gap on Sydney and may soon take the title of Australia's largest city.

Melbourne added 62,306 residents in the 12 months to June last year with its population growth being nearly double that of Sydney.  The KPMG Population Report said if relative growth rates continues, Melbourne would overtake Sydney in 2028.

The study also found that more Australians are forsaking the suburban backyard for an inner-city lifestyle in record numbers.  It is the first time in the KPMG Population Report's 18-year history that the number of people moving to be closer to the CBD has rivalled those heading to suburban-growth corridors.

The report suggests that under-40's and empty-nest baby boomers are reversing years of growth in the suburbs by moving downtown in the biggest cities.

In Melbourne, Sydney and Brisbane, new residents moving to fashionable areas downtown topped 7,000, 6,800 and 6,300, respectively, in the year to June 2006, exceeding the numbers in each city's fastest-growing suburbs.

"The central core of our largest cities is emerging as a growth area that now competes with the outer suburbs and with parts of the beach as the preferred destination for Australians on the move" author Bernard Salt said.

Another study that should encourage investors at this time of mixed messages was recently released by the ANZ Bank who predict that Australia could have a shortfall of 200,000 homes by 2010.

With a current demand for around 180,000 dwellings annually, but only 150,000 houses being built, the figures clearly show we are just not building enough properties.

With historically low vacancy rates, but increasing immigration and changing demographics creating strong demand renats will keep rising and the value of well located capital city properties will keep rising in the forseeable future. 

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