Here are my 5 key takeaways from the census you won’t read elsewhere, which are most applicable to us as investors:
- House size
- Rental Growth
The murmur of an oversupply in housing seems to now be long gone - despite a few in denial, the Australian population saw an average growth rate of 1.76% per annum – still well above the 20 year average of 1.4%!
The reason why there is so much activity out there is because there is no longer a want but now a need to keep up with the demand - (Step 1)
Case in point for us are three of many areas we targeted in Victoria and Queensland were:
- Craigieburn (3.0% population growth p.a.) which saw a land value growth rate of 24.63% each year!
- Sunbury (4.5% p.a.), whose land value grew by 114% between 2008 and 2017. (BTW some clients who bought in Sunbury 2011/12 were worried about price growth; not so now as last year it kicked in big time)
- And Pimpama in Queensland which has a whopping 16.5% per annum population growth rate!
Its land value has grown by 17% p.a. for the last decade!
Migration is a huge factor to Australian population growth – both interstate and overseas migration has traditionally (for the last 10 years) accounted for a little bit over 55% of each states’ growth!
So where is everyone going?
Victoria saw the highest level of interstate migration in 2016, sitting just below 18,000 people, followed by Queensland which saw just over 14,650 migrants. This confirms the traditional population cycle for Queensland as it jumped 76% in a single year!
New South Wales on the other hand saw over 12,800 people move out! No need to ring the alarm bells though, traditionally, NSW has had a weaker performance when it comes to Interstate migration, but does considerably well in its overseas immigration.
House size - Why size matters
People are still complaining about prices being too high and the government keeps trying to roll out new strategies to cause an oversupply to counter the growth.
Yet almost three quarters of the population are still living in detached houses (the least affordable option) and the average occupants per household has stayed at 2.6 since 1996 following the 3.4 in the baby boom. Affordability is still out there, and so is the growth.
What has changed is the makeup of household income which has grown from 1 income per household in days gone past to 1.6 incomes per household whilst household numbers reduced to 2.6.
Average house size sits around 230m² which means we live in 88m² per person on average. If you live in London you're used to living in around 28 m² per person.
I find this interesting because income options like Airbnb soak up all this unused space we have and increases household incomes.
The median rent in Australia has seen a jump of 17.5% in the last 5 years. This has slowed right down from the 2011 census which had seen a huge growth of 50% from 2006. My best guess is that this slowing rental growth followed the heady days of the mining boom which as we know led to the lowest interest rates and lowest growth in 50 years.
Still worth noting residential rents outstripped inflation and cash rate and has created a great opportunity for Custodians in being able to buy investment property that is cash flow positive but still providing a tax deduction – (step 3)
The affordability debate is a great headline, and has been for 50 years. I've got old newspaper articles my mentors gave me from 1971 when house prices were $12,000 and talk of unaffordability and crash.
Sydney sits at $1,050,000 and Melbourne today is $755,000, which provides most of the fuel for the debate. Early Custodians bought Sydney in 2011 for $395,000 and most paid well under $500,000. In fact we pulled out of Sydney when the median hit $750,000 not for worry of a crash, but more so better return, growth and cash flow options in Melbourne and SEQ - (step 5).
The Australian median is $670,000 whilst the Custodian median price sits at $500,000. What’s important about those stats is that we are in high growth areas, good land content and cash flow neutral or positive with the tax deductions.
But back to the census the median mortgage repayment across Australia has dropped to $1,755 a month and 9 in 10 households are on-par with their budget. Over 92% of Aussie homes are meeting their mortgage repayments with the recommended 30% buffer! And this has gone up since 2011.
Success belongs to the optimists (unless of course you're a journalist or trying to get the masses attention). The numbers confirm it as the pessimists always point to a crash in real estate prices… Just give me one factual example of this in history. In fact show me more than 2 years of price decline in the Australian housing market in the last 60 years?