Why Australia’s property prices aren’t going down

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Recently I was discussing the subject of cities and growth with a parliamentarian who subscribes to the old Bob Carr and Dick Smith view that not all growth is good, and that our cities may have already reached their optimal number of residents.

Many people disagree – and I totally disagree. As I respectfully explained to my parliamentary friend, there are certainly consequences to growth, but there are far greater consequences to no growth.Just ask the Japanese, who have suffered negative population growth and asset price deflation for over 20 years now. It is not a pretty picture.

In fact, in my view it is only growth that can keep an economy alive and a workforce active for new jobseekers. Growth is also supremely important for the renewal of cities, the revitalisation of old and obsolete industries, and the repositioning of our smart and innovative nation in the world’s new order.

Central to growth remains our still-very-well-positioned policy of active immigration. And this is vital because immigration still accounts for the bulk of our current 1.5% growth rate, which is among the healthiest in the OECD.

Surprisingly, as the latest ABS figures show, Victoria is now our strongest-growing state, which is underpinning strong housing demand. On the other hand, we have witnessed a 68% drop in Western Australia’s growth rate since its Everest-like peak in 2011/12, when tens of thousands of people came in during the mining boom.

With the boom now finished, we have seen an outflux of residents to other states, resulting in a weaker housing market with more properties for sale and less demand for them. It’s simple economics. This also explains the woes of Queensland in the last three years, during which the property market has undergone very modest growth, partly due to a decline in international immigration.

Our eight biggest cities now account for over 77% of Australia’s total population of almost 25 million, indicating that we do still love being in the big cities. This is a trend that I do not foresee changing, and as our cities continue to experience strong migration levels, I believe house price growth will continue.

So, despite some open calls to cut immigration levels, I say we should embrace our growing cities. We have arguably some of the world’s most liveable cities, and we should plan them for more people and more growth. We should then use the additional tax revenue to provide a first-class transport system and better supporting infrastructure, which is generally always good for property prices.

To my parliamentary friend and those others who think that growth is the problem, I say this: it is very clear to me that well-planned growth in all of our cities is actually the solution, and that solution is well within our Antipodean grasp.

Dr Shane Geha
is co-founder of EG Advisory
and has a PhD in planning, on
‘Quantifying the Rezoning
Effect’. He has extensive experience of managing
the rezoning of over $12bn worth of property



Top Suburbs : south brisbane , woolloongabba , collingwood , westbrook , kariong

  • Terry Comino says on 24/02/2018 01:01:03 PM

    Well said Shane. The same applies to Australia as a whole and not just its individual cities. We hear similar small minded arguments that somehow the entire continent of Australia has maximized its carrying capacity at just 25 million when other countries just to the north that have not even 1/20 th of the land mass and resources that we have happily carry eight or ten times our population.

  • Glenn Groves says on 26/02/2018 02:21:48 PM

    Australia is the driest continent on Earth. The populations of other nations that have a higher and better spread rainfall than Australia have no relevance to what population size would work in Australia. We already run low on fresh, clean water on a regular basis, but we seem to think that constantly adding more people therefore more demand for water will magically make it rain more also. (Well, obviously people don’t actually think that, what they actually do is completely ignore it.) Suggesting that we can keep adding people because other countries have way more than us also ignores the quality of life in those other countries. Most are far lower than ours now. We should not be blindly following in the footsteps of other countries when we are already ahead of them in the most important measure - quality of life.

    If an investment only manages to pay out returns by increasing the number of investors putting money in, we call it a Ponzi scheme, and we call it bad. When a country only manages to pay out returns by increasing the number of people coming in, we call in good. There would seem to be a contradiction here, yet no one wants to talk about that.

    The root cause of the disagreement is simple - human foible. There is a saying “when the only tool you have is a hammer, every problem starts to look like a nail”. “Ideal” population levels cannot be determined by economics alone - and to do so would be dangerous. It also has to take into account many hard sciences - for example meteorology and pedology (soil science). Those are the people who would be raising alarm bells about eternal population growth, and their input must be included also. Just because economics may say eternal population growth is good does not mean that the physical world can actually support it. In reality the hard sciences are the ones that would determine “ideal” population size - and economics can only broadly advise on one single aspect of it.

    In investing, it is dangerous - a gamble - to only consider some aspects of the investment and ignore others. To decide on population growth only based on economics is just as dangerous. Fortunately for us, it is not us that will pay when we get it wrong - it will be our children, our grandchildren, our great grandchildren, their children, their grandchildren, and all the way into the future. We can not afford to bury our heads only in the sands of economics when most of Australia literally is sand and is therefore essentially incapable of supporting human life. Only a small-ish proportion of Australia can effectively support human life, and even some of that area is more fragile than others areas of the world that people are so willing to compare against.

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