House prices could fall further if Australia’s population growth rate starts to slow – and pressure from some politicians might make that a reality after the next election.
Australia’s population grew 1.6 per cent in the year to March 31, 2018, matching the rate for the previous 12 months, according to figures released by the Bureau of Statistics on Thursday.
Saul Eslake, an economist who has worked with ANZ and Bank of America Merrill Lynch, said the latest figures might not mean much for the economy. But an ongoing decline in population growth had the potential to bring down house prices.
“Population growth has made a very large contribution to the recorded growth in Australia’s economy over the past five years, say the period since the mining boom peaked,” he said.
“All else being equal … slower population growth will mean slower overall economic growth.”
That might mean growth in the demand for housing also slowed – on top of already falling demand from investors and an increase in the supply of apartment.
“Putting those things together could mean a little more downward pressure on house prices,” he said.
Immigration accounted for 62 per cent of population growth in the year to March 31. Given the renewed focus among some politicans on immigration, that might soon change, Mr Eslake said.
“The government has already cut the migration intake, that’s the permanent migration intake, and it’s under some pressure from its own right wing and some fringe parties even further to the right to cut it further,” he said.
“Tony Abbott and others such as Pauline Hanson are actively arguing for a further cut in the migration intake as a ‘solution’ to Australia’s housing affordability problem, and … some people tout that as a solution to persistently slow growth in real wages.
“I don’t buy either of those propositions but the government might – between now and the next election – succumb to pressure from those quarters to act in those directions.”
Moody’s Analytics reports housing values in Australia’s capital cities have fallen by 2.5 per cent since their peak late last year. Apartment values are down 1.7 per cent.