DEMAND-SUPPLY IMBALANCE TO FUEL PRICE GROWTH

Strong population growth, coupled with limited new housing supply, is driving a recovery in Australia’s housing market despite the impact of higher interest rates still  washing through the economy. This demand-supply imbalance is expected to fuel further growth in residential property prices. With the potential for apartment prices to outperform house prices, in contrast to recent historical experience, the residential sector will be an investor favourite in 2024.

POPULATION GROWTH DRIVING DEMAND

There has been a faster than expected recovery in Australia’s population growth due to a rebound in net overseas migration predominantly to Australia’s east coast cities: Sydney, Melbourne, and Brisbane. Net overseas migration increased by c.454,000 people over the year to Q1/2023, the highest annual rate ever recorded, and up from c.+128,000 a year earlier, and a pandemic low of c.-94,000 in the year to Q1/2021 when Australia’s border was closed to overseas arrivals.

Among the states, Victoria’s population is growing at its fastest rate since 2016 (+2.4%), while NSW is growing at its fastest rate in more than four decades (+1.9%) and Queensland, 16 years (+2.3%). Despite the east coast cities dominating annual trends in people moving to Australia, population growth in WA is outpacing the national average with its fastest growth rate in nine years (+2.8%) as the state benefits from interstate migration.