Recent Census data highlights substantial changes to property in Australia. How will this affect investors?
September 28, 2017
The 2016 Census property data shows that there have been rapid changes over the last 5 years. Some of it could have been assumed, but some of the trends have accelerated and are ahead of government policies designed to manage property demand for the various demographic sectors of society.
Nationwide, home ownership has dropped 1.5% to 65.5% between 2011 and 2016. In our larger cities, home ownership is declining faster than the national average rate – with Melbourne and Sydney falling by 3% - which is more than double the rate of decline nation-wide. These percentages sound small, yet the numbers are huge, especially if the trend continues, as it means about a 5% increase in the proportion of households that are rented in Melbourne and Sydney. Research by major US and Australian financial organisations has validated this increasing demand for residential rental properties (I will write more about this in a future blog).
In addition to the much talked about mortgage stress by those with large mortgages; the competition for rental properties in many locations results in rental stress being worse than mortgage stress; where some tenants are having to pay more than 30% of their income in rent. Fitting in with the above, the percentage of fully-owned, mortgage free homes has dropped to the lowest figure in 70 years at 31%, (from 41% only 25 years ago).
A lot of these trends will continue due to our increasing population, especially in the main capitals - which increased by 8.8% (about 2 million) over the 5 years to 2016. The population growth by migration has for the first time occurred with the numbers coming from Asia exceeding the number from Europe as we become increasingly culturally integrated into the Asia Pacific region.
Melbourne is on schedule to eclipse Sydney's population by about 2048, as the extrapolated average number of "new people" added to Melbourne per week since 2011 sits at 1859 compared to 1656 for Sydney. Sydney's lack of greenfield space for new estates and higher property prices will require more of their future residences to be vertical (high-rise) and infill, where new residences are added into established areas. Melbourne has more capacity to add housing through new housing estates and is more affordable than Sydney for new migrants. Plus, Melbourne's better "liveability" and being a corporate centre makes it a prime choice. Also, Melbourne is host to many international students – many of who many gain Permanent Residency and join the workforce needing different types of housing as they graduate through different stages of life.
Housing affordability is harshest in Sydney. Elsewhere it is less of an issue. Melbourne's median house price is about $825,000, which most agree is unaffordable for first home buyers; but affordable options still exist below the median, in the apartment and outer suburban locations, once they have their finances in order. There is also the increasingly popular rentvesting option. (link)
So, what does all this mean for property investors? With population growth and an increase in the proportion of people who need to rent - the demand for well-located investment (rental) properties is logically quite assured into the future.
feel free to ask me any questions in relation to the above or any property
related matter that is of interest to you.
Investment Property Researcher
This information in this article is for general discussion purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any decision of a financial nature you should seek advice from a qualified and registered financial, tax and legal adviser. No material contained within this article should be construed or relied upon as providing recommendations in relation to any financial products or assets or to make any decision. All readers should make independent inquiries to satisfy themselves of the accuracy and suitability of the information to their personal position. No liability is accepted for decisions made using any views in the article. All Content is provided "as is"and without warranties of any kind, either express or implied. Andrew Gabriel is an independent Property Researcher. The views expressed in this article are the views of the author, and do not necessarily reflect the views and opinions of BCV Financial Solutions.