Population growth overrated when valuing property

Strong population growth equals an increase in property values right? Wrong, says a new report by leading property publication Your Investment Property.

The property industry has long argued a correlation between population growth and capital growth to improve their investment’s future capital growth potential. However, the report published in the new issue explains that not only is population growth the most overrated indicator of capital growth, but it can be an indicator of negative growth.

The problem comes in the practical application of population growth data, says property research expert Jeremy Sheppard, who wrote the report. This is partly due to the nature of the data itself:

• Population growth data is a lag indicator – the Australian Bureau of Statistics (ABS) records and publishes data after the population has already grown

• Data is sampled too infrequently – The ABS conducts a nationwide census every 5 years so buyers can only use the data to try to establish a trend and assume it will continue

• Publication of data is delayed – The results of the ABS census are published almost a year after the survey is conducted

The report outlines many more reasons to be sceptical of population growth data as an indicator of capital growth. Instead, homebuyers and investors are cautioned to conduct thorough research in an area before buying, and not to look at population growth data in isolation.

For the full report see the new issue of Your Investment Property available at leading newsagents or online at www.yourinvestmentpropertymag.com.au