General Housing Growth in Australia
At Adelaide Property Finders Pty Ltd we believe that property investment opportunities exist everywhere and that by understanding the markets you invest in as well as various investment strategies, great opportunities can be found anywhere. This section will focus on Adelaide in the greater context of the Australian market.
Does Population Growth Dictate House Price? - You May Be Surprised
Adelaide is the 5th largest city in Australia. When comparisons are made between the 6 largest cities in Australia (insufficient data existed for Hobart and Darwin) and when median home prices are assessed over a 25 year period, it becomes apparent that rate of capital appreciation for residential property amongst the 6 cities is highly comparable.
Median home prices for each capital city were obtained from the Real Estate Institute of Australia and population figures for each capital city were obtained from the Australian Bureau of Statistics. The 25 year analysis was performed between the years 1980 and 2005. These years were selected to provide a broad overview of capital appreciation in the residential property markets over a long but still historically relevant time period. This time period was also selected as it provides a good assessment of Perth home prices pre-resource boom. Perth property prices post 2005 will be discussed in the Opportunities for Adelaide section.
The following table represents the population growth in the 6 major capital cities between the years of 1980 and 2005.
It has often been said that population growth is a key contributor towards property price growth. The rational for this is that if the population increases there would be a demand for housing and if there is a demand for housing the simple laws of supply and demand would dictate that home prices should increase.
According to this rational it would be expected that Brisbane and Perth should have the highest rates of capital growth within Australia. The following table represents median home prices in each of the capital city in 1980 and 2005. It also presents what the average capital growth per annum would be expected, based on the observed median home prices.
From the above tables it is clearly seen that Perth, which had amongst the highest population growth in the country recorded the lowest average capital appreciation of all the capital cities. between 1980 and 2005. Canberra, whose population growth was less than half of Brisbane’s had the highest average capital appreciation of all the cities assessed. And generally speaking the average rate of capital appreciation amongst all of the cities assessed was highly comparable despite the large variations in population growth which existed between them. Only a 1.1% difference exists in the average annual capital growth observed in all of the 6 cities despite variations of up to 51.2% differences in population growth during the recorded period.
Given the above data and the lack of correlation between population growth and house prices, what are possible Factors Effecting House Price Growth in Australia?
|
City
|
1980
|
2005
|
% Growth
|
|
Sydney
|
3257500
|
4254894
|
30.6%
|
|
Melbourne
|
2787400
|
3634233
|
30.4%
|
|
Brisbane
|
1063300
|
1810943
|
70.3%
|
|
Adelaide
|
948000
|
1129269
|
19.1%
|
|
Perth
|
899400
|
1477815
|
64.3%
|
|
Canberra
|
243200
|
324786
|
33.5%
|
It has often been said that population growth is a key contributor towards property price growth. The rational for this is that if the population increases there would be a demand for housing and if there is a demand for housing the simple laws of supply and demand would dictate that home prices should increase.
According to this rational it would be expected that Brisbane and Perth should have the highest rates of capital growth within Australia. The following table represents median home prices in each of the capital city in 1980 and 2005. It also presents what the average capital growth per annum would be expected, based on the observed median home prices.
|
City
|
1980
|
2005
|
Average % Growth/annum
|
|
Sydney
|
$64,800
|
$536,000
|
9.2%
|
|
Melbourne
|
$40,800
|
$352,000
|
9.4%
|
|
Brisbane
|
$34,500
|
$307,500
|
9.5%
|
|
Adelaide
|
$36,300
|
$270,000
|
8.7%
|
|
Perth
|
$41,500
|
$297,000
|
8.6%
|
|
Canberra
|
$39,700
|
$366,000
|
9.7%
|
From the above tables it is clearly seen that Perth, which had amongst the highest population growth in the country recorded the lowest average capital appreciation of all the capital cities. between 1980 and 2005. Canberra, whose population growth was less than half of Brisbane’s had the highest average capital appreciation of all the cities assessed. And generally speaking the average rate of capital appreciation amongst all of the cities assessed was highly comparable despite the large variations in population growth which existed between them. Only a 1.1% difference exists in the average annual capital growth observed in all of the 6 cities despite variations of up to 51.2% differences in population growth during the recorded period.
Given the above data and the lack of correlation between population growth and house prices, what are possible Factors Effecting House Price Growth in Australia?
