26 February 2011
There is a common myth that an increased population will mean higher real estate prices and less Australians able to afford a home.
Population and real estate prices
Cities with static or declining populations typically see long-term falls in home prices. This is not as good as it sounds. It makes banks nervous about lending and people become reluctant to buy. Home owners perceive their wealth to be in freefall and they stop spending. This creates a vicious cycle.
While steadily rising home prices are a sign of economic success, it’s true that, in many places, home prices are rising by too much, too fast. Thats due to a national housing shortfall that’s likely to reach 300,000 homes within four years.
The shortfall comes courtesy of regulatory constraints, as well as failure by government to invest in urban infrastructure.
The regulatory constraints will need to be addressed whatever the outcome of the population growth debate.
Immigration actually helps to deal with the inadequate public investment in infrastructure, because new migrants increase economic activity and bolster tax receipts. This extra money should, in part, be invested in new urban infrastructure.
More information
For more information (and source details) please read our fact sheet:
