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Investment Insights from the Census

The data trickling out of the 2016 Census has given us some investment insights.

Let’s start with the principle that investors want to buy where prices are likely to rise. For real estate, that’s where there is steady population growth, the supply of housing is growing steadily or even slowly, there are good transport links, and incomes are rising.

The Census shows these areas through the population data. Broadly, in the five years since the previous Census, Australia’s population rose by 8.8% to 23.4 million. But this growth has been unevenly spread.

The populations of the major capital cities jumped by 10.5% – led by Melbourne (up 12.1%) and Sydney (up 9.8%) – while there was little or negative growth in regional areas.

Source: Australian Bureau of Statistics

At the suburban level, the data shows that people are favouring the central business districts (CBDs) and inner-city suburbs. For instance, the populations of Melbourne’s CBD and inner-city Docklands, where apartment construction over the period each grew by more than 150%.

Even so, the populations also grew in inner-city areas that haven’t had a boom in apartment construction, such as Kensington in Victoria (up 31.7%) or Petersham in NSW (up 16.9%).

Demand–supply tension

Short-term investment opportunities come from tension in the demand–supply equation. If the supply of housing is growing faster than the population, property prices tend to fall or at least stagnate. In the Census, this shows up as the change in the average number of people per bedroom in each suburb.

The inner-cities had an average increase in the number of people per bedroom of 10% since the 2011 Census, compared with zero increase or negative growth for the rest of the country.

While the number of occupied apartments has increased over the past 25 years, the number of occupied separate houses has also grown to 6,343,419 in 2016 from 4,533,595 in 1991. There is now about one occupied apartment for every five occupied houses in Australia, compared with one for every seven in 1991.

Dwelling counts – separate houses and apartments, 1991–2016

Source: Australian Bureau of Statistics

There have also been significant changes in immigration, with increases in the number of people coming from China, India and the Middle East and a decrease in the number from England.

As a result, Sydney is now the most culturally diverse city in the world, with 39% of its population born outside Australia.

Follow the money

Finally, despite the recent stagnation in wages growth, the income for the average Australian household rose 16.5% over the five years.

In the areas where there has been very active apartment construction, incomes have not risen as significantly as in the established inner-city suburbs. For example, incomes rose 18.4% in the Melbourne CBD and 11.6% in Docklands but 45.2% in Kensington and 60.7% in Petersham.

This shows that inner-city areas with population growth, slowly increasing housing supply, good transport links and rising incomes are the best bets for investors.

However, it would also pay to bear in mind Australia’s changing cultural profiles as these will also have a substantial impact on society and the economy in the future.

The information provided here is general in nature and does not constitute personal advice.

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