The population boom will drive the next property cycle

If you are considering investing in property, you can’t be blamed for wondering which way to turn considering all the mixed messages in the media.

In the one camp are those who suggest we are entering a new property cycle and property prices will once again boom, and in the other are the doomsayers who suggest that our property markets will lose value now that interest rates have bottomed (yesterday’s rate rise notwithstanding) and the first home owners grant boost has ended.

But those pundits who predict Australia’s property markets will collapse and property values will fall will once again be proven wrong.

And here is why….

Figures recently released by the Australian Bureau of Statistics showed that Australia’s population grew by 2.1% to 21,779,000 in the 12 months to 31st March. To provide some perspective, Australia’s population growth has never been this high. In fact, this level of growth has not been seen since the baby boom of the 1960s.

And this is at a time when we are experiencing a housing shortage!

But even more significant was the Federal Government’s upgraded population forecasts suggesting that our country’s population is expected to grow by 65% to over 35 million people by 2049. In fact, Australia is poised to be the world’s fastest growing industrialised nation over the next four decades, with a rate of population growth higher even than India. This is around 7 million more than estimated two years ago and as population growth is one of the main drivers of our property markets (as it constitutes demand for housing) this will have a significant impact on our property markets.

Currently about 70% of Australians live around our major capital cities and it is likely that this will increase to closer to 80% in the future. Right now, one in six Australians are living in Melbourne and one in five in Sydney. All these people moving into our major cities will create a property boom of untold proportions. About 40% of the dwellings that will be around in 20 years time, in 2030, haven’t even been built yet.

This growth will underpin our property markets and ensure property values keep rising like they have for the last 100 years. Obviously this tremendous growth will also create enormous strain on our cities infrastructure especially in the areas of transport, roads and water.

Of course over the next 40 years we’ll also have a few more recessions and probably another depression, so it won’t be all smooth sailing. But it does mean that those who predict Australia’s property markets will collapse and property values will fall will once again be proven wrong.

Michael Yardney is a best selling author and one of Australia’s leading experts in wealth creation through property.