The composition of a population – including factors such as age,
migration patterns and population growth – has significant effects on
the housing market. Major shifts in the demographics of a nation can
have a large impact on real estate trends.
Projections from the Australian Bureau of Statistics (ABS) estimate
that by the end of this decade, our population will be approaching 29
million. To accommodate this there will need to be an increase in
dwellings, or there will be heightened competition for existing homes,
which will in turn impact prices.
An additional factor that will positively impact the property market
is the return of overseas students and migrants now that our borders are
open. Similarly, it appears that the pandemic-fuelled “movement to the
regions” mentality has continued, with highly sought-after areas around
Central Victoria and the Mornington Peninsula still experiencing strong
demand. According to the Australian Financial Review: “The housing boom
is far from over in the regions, with prices in some areas expected to
rise by another 20 per cent this year as demand continues to outstrip
Supply chain disruptions and a shortage of materials, coupled with
more and more people wanting to renovate or extend their homes, has
resulted in a surge in building and construction costs.
High material and labour costs – the likes of which drove ASX-listed
home builder Simonds Group to a loss for the six months to December 2021
– could also cause builders to collapse, contributing to supply issues.
According to CoreLogic, this construction cost inflation could
continue for another 12 to 18 months, ultimately impacting consumers’
As a result of this, it is possible people may start to favour
established housing or homes with smaller renovations needed, in turn
underwriting some stability in the established home market.
An equally important factor to rising interest rates in slowing
property markets is macroprudential or governmental measures. Following
the macroprudential measures APRA introduced in 2017, and the Royal
Commission into the finance sector, we witnessed how the tightening in
the availability of credit negatively affected the housing market.
On the other hand, more recent policies by the Labor Government, such
as the “Help to Buy” and “Regional First Home Guarantee” schemes, will
serve to positively influence the residential property market by aiding
eligible buyers to enter the property market.
After a long period of sustained growth in the post-GFC period –
fuelled by lower interest rates, particularly during the pandemic years
of 2020–21, which also saw a massive amount of government stimulus
injected into the Australian economy – we are entering into a transition
phase for the property market with a reversion to more historical
clearance levels and a balance between buyers and sellers. With
sustained high employment and the continuing reasons for people to
transact property, we are confident the market will withstand this
period of adjustment.