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Census shows human side of property numbers game

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  • Census shows human side of property numbers game

    Census shows human side of property numbers game
    * June 30, 2007

    STATISTICS can make your eyes glaze over and often mask as much as they reveal.

    The latest Census figures show resources-driven Brisbane and Perth have pushed Melbourne from second to fourth on the nation's income ladder, with Brisbane fast catching Sydney as the highest-income city.

    Sydney's median household income rose just $7 a week in real terms since the 2001 census, and Melbourne's by $48 a week. But Brisbane's household income grew by $154 a week over the

    same five-year period, while across the country in Perth it increased by $151.

    Relating this to the property market is more complex. It doesn't automatically mean investors should rush out and buy where the income increases have occurred. In fact if potential investors look at Macquarie Bank's real estate market outlook, aptly titled "Real Estate Carnival - Game of Skill", also released this month they will see a link between migration and affordability that is more important.

    Macquarie says net migration is at its strongest in 18 years, and is expected to increase, providing demand for both owner-occupied and rental housing.

    It makes the point that affordability plays a role in migration. For example in mid-2004 more people left Sydney than arrived, as it was too expensive.

    After 3 1/2 years of downturn, that has been reversed with fewer people leaving the harbour city and more overseas migrants making their way there.

    In Queensland migration has slowed and so has price growth and sales volumes. Western Australia has seen a 66 per cent jump in migration over two years, but because affordability has deteriorated it's expected the rush to the west will slow, as will demand.

    Victoria has held up well in the migration stakes, having the added bonus of never having reached an extreme lack of affordability levels, even at its peak. South Australia has seen an exceptional improvement in migration, including the strongest overseas influx on record. It's one of the reasons, Macquarie says, that Adelaide's house price growth has been solid relative to many other capitals.

    So we have strong migration and tight rental markets. What next?

    Normally investors move in, construction and new housing increases.

    Investor demand is returning, but most investors are looking for existing rather than new product. In the short-term, that will continue. That's holding back developers, particularly in Sydney.

    Industry commentator Michael Matusik of Matusik Property Insights, believes that if migration remains robust, it will translate into new housing construction. He predicts that by about 2009 new residential stock will be considered good value, compared to second hand or established housing.

    "New dwellings are good value," he says, "when they are about 20 per cent more than similar established property in the same area."

    At the moment the differential is about 30 per cent, but 18 months ago it was 40-odd per cent. The broad message, according to Macquarie, is expect moderate price growth for the next 12-18 months, and low construction levels will see price pressure in scarce locations on the eastern seaboard.

    That's probably why the residential section of Macquarie's report is entitled "Not the fastest Ride in Town ... yet".

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx