Population growth in a pandemic: what does this mean for property?

In August, a group of academics from the University of Queensland’s Centre for Population Research released a study assessing population growth scenarios as a result of coronavirus. Population and demographics feature as one of four macro drivers in our research model. This may seem intuitive. Changes to a population will inevitably result in changes to the requirements for homes in which they live.

Over the course of 2019, the Australian Bureau of Statistics estimated that the Australian population had grown by 349,800 people to a total of 25,522,169. This figure exceeds the highest range forecast for 2019 by 44,033 people (see below chart), continuing the tradition of Australian population growth exceeding ABS forecasts. Of the 349,800 people added to Australia’s population in 2019, three-fifths were due to net overseas migration (immigration minus emigration) and two-fifths were due to natural increase (births minus deaths).

ABS Population Projection vs Actual 2019 Population

Net Overseas Migration

It doesn’t take a genius to infer that Australia’s net overseas migration has taken a hit in 2020. In March, the Prime Minister’s office announced a border closure to all non-citizens and non-residents. Any overseas migration since that date will therefore be largely attributed to expatriates returning to the relative safety of home. According to the Department of Foreign Affairs and Trade, 357,000 Australians had returned home in the four months between the March border closure announcement and early-July. That’s just one-third of Smart Traveller’s estimated one million Australians living and working overseas under usual circumstances. Thousands more continue to arrive each week, but the question is how much this outweighs the loss of temporary visa holders. One notable cohort within this mix is international students, who have become a notable absence from inner-city student accommodation.

Natural increase

Australia has had the privilege of reporting minuscule fatalities since the beginning of the pandemic. Even the second peak pales in comparison to a quiet day in other western democracies. Because of this, one wouldn’t expect coronavirus itself to impact natural population increase. Something more interesting, however, is how young families are expected to respond to the pandemic. In the early stages of the pandemic, pundits around the world were predicting a baby boom as couples were locked at home together with little to entertain themselves. It appears the impact on the birthrate may be the opposite. According to the UQ study, the precedent of fertility decline during economic downturns is well documented. The proactive measures taken by the Australian Government to protect jobs and the economy might mitigate the psychological impact on would-be families though.

What does this all mean for property?

The UQ study proposes three scenarios of population growth accounting for the pandemic, with things returning to relative normal in 2021-22 in their light scenario. This projection would result in a 2030 population of 142,577 less than it would have been without the pandemic (or an average of 14,258 per year), reducing annual demand for new homes from 144,185 to 138,700. In other words, it has a negligible impact. Even in the study’s worst-case scenario, an average of over 100,000 new homes would still need to be built each year. With disruptions to the commissioning and construction of numerous housing developments around the country due to the pandemic, undersupply could become the most likely short-term outcome. If that is to occur alongside record-low interest rates currently being experienced, it is likely a buying frenzy will emerge in the wake of the pandemic, placing upward pressure on prices.

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