Is Population Growth a Good Real Estate Indicator?
For the website Your Investment Property, Nila Sweeney weaves an article around the expert opinion of Jeremy Sheppard, creator of DSRdata.com.au. Sheppard believes that population growth is a property market indicator that misfires more often than not and this is because the indicator is often misinterpreted.
Population growth as an indicator for the property market
It is natural for population growth to suggest an enhanced demand for properties and a subsequent rise in their rates, but this does not always happen. This discrepancy can be put down to how we interpret population data. Sheppard points out that population data is compiled every 6 years and this is a rather long stretch of time. Things may change drastically between two census data.
Previous growth
Previous price growth, for a number of reasons, seems like a truer barometer for price fluctuations and should be preferred over population growth. Not only is it very immediate in nature but it is also much more clinical.
How, if at all, should population growth be evaluated
Sheppard also feels that if population growth must be evaluated, “where people might move to” and not “where people have moved” should be the focus. It is not easy data to master but local councils can give us a fair clue all the same.
In Sheppard’s opinion, vacancy rate is another precise indicator and it keeps a tab on the supply metrics and possibility for increase in rent.
You can read the original article here.
Misleading indicator
Imagine a place which sees a sudden population upsurge between two census data. How will such a population zone be used as an indicator for the property market? The writer warns us how misleading it can be, and she could not have been more correct.
Why has population grown?
The reason for population growth may be manifold. If there is a definite gentrification then it is easy to believe that the fast-urbanising mass will heighten the property rates, but what if the population growth is because of net interstate migration? The skilled or unskilled labour force can’t be expected to do the same for the property market.
Which indicator or indicators do you mostly rely on?
