Interpac Business and Migration Solutions Melbourne Australia

(July.18)

Demand follows population, for better or worse.

One of the primary factors that drives real estate prices is where people choose to live. Towns and cities with big populations have historically achieved the highest rates of property market growth.

Investors need to monitor where future population growth is expected to ensure the value of their properties keeps rising.

A large population means there are more owner-occupiers looking for homes. This helps to push up prices. There are also more tenants, which tends to increase rental demand and rents.

But the fact is Australia's population growth rate is slowing. This is occurring as residential building in Melbourne - particularly of skyscraper apartment towers - is entering a new growth phase.

Michael Buxton, an urban planning specialist at RMIT University, says net overseas migration to Australia has fallen markedly since 2009.

Mr Buxton says this decline, coupled with a big fall in the number of overseas students coming to Victoria, will hit demand.

''There are signs that demand for inner-urban apartments is going to drop off somewhat over the next couple of years,'' he says. ''I think demand will fall.''

Australia's population growth rate slowed to 1.5 per cent in the year to December 2010, according to the Australian Bureau of Statistics. This is down from a peak growth rate of 2.2 per cent in the year to December 2008.

The ABS's preliminary net overseas migration estimate for the year to December 2010 (171,100 people) is 35 per cent lower than the migrant intake in 2009 (264,200 people).

The migration figure is important because migrants account for just more than half the population growth rate. The remainder comes from the natural population increase, which the ABS defines as births minus deaths.

Of course, other factors affect demand, from the state of the economy to demographic changes.

The divisional director for Victoria of property services group Savills, Nick Peden, says Melbourne's reputation for economic and political stability and its affordable land prices are drawing offshore developers to the city.

Since January, Savills has sold six residential development sites in Melbourne, setting land value records for their locations. These include two sites at Southbank that sold for more than $12,500 a square metre.

Mr Peden says an ABS forecast that Victoria's population will grow 1.6 per cent a year until 2026 indicates an additional 1.5 million people will need accommodation, mainly in Melbourne.

''Developers are very confident that prices are going to increase.''

Source from Theage.com.au