Housing Market Update: Houses and People


  • Population growth over the next year likely to be the slowest in over a century;
  • Lower population growth is a negative for house prices;
  • But improved affordability is a positive.
  • The house price decline has a little further to run;
  • But a modest pickup is likely in 2021-22.


Treasury projects population growth will be 0.2% in the 2021 financial year and 0.4% in the following one. They think there will be net emigration in those two financial years. Treasury also makes an assumption that there will be a (modest) decline in the birth rate over the next couple of years as a result of the uncertainty surrounding COVID.

How strong and quickly the Australian economy recovers (both in absolute and relative to country peers) will play a crucial role in determining the future strength of immigration. The level of immigration will also depend upon society attitude. The Treasury assumptions on when immigration numbers will start to rise again appear reasonable. But the uncertain economic outlook means the growth of immigration might be lower than in the decade prior to COVID.

The year-to-year link between the state of the economy and the birth rate over the past 60 years has been less than clear. The success of the Governments’ income support programs means that while the economy has gone through a rough patch this has yet to translate into (most) household disposable incomes. Consumer confidence is also currently highest amongst adults during the prime child-bearing years

For the housing market slower population growth means there will be less people to buy a house. Historically lower population growth has coincided with a lower house price in most major capital cities. Interestingly the link between population growth and house prices has not been as tight over the past decade. Low affordability reduced demand as it cut the number of people who were able to afford to buy a house.

As the economy improves next year (and assuming a vaccine is found) demand for housing should improve. This should help house prices to pick up in the second half of next year, although that rise will be partially mitigated by the rise in the supply of new houses. Consensus expects a small fall in house prices next year, with a modest rise expected for 2022.



To read my full update, click here.


We live in interesting times!


Peter Munckton - Chief Economist