Considering that population growth is essentially a proxy for housing demand, the recent release of demographic statistics for the March quarter by the Australian Bureau of Statistics provides a timely insight about how demand for housing is changing across Australia.  The headline numbers showed a subtle reduction in the pace of population growth, with the annual growth rate sliding from a recent high of 1.72% over the twelve months to March 2017 to 1.55% over the 12 months ending March 2018.  The most recent 12-month period saw an additional 380,722 new residents calling Australia home.

At a national level, Australia’s population growth is primarily driven by overseas migration, which comprised 62% of the annual gain in new residents.  The remaining 38% came from natural increase, or simply the number of births minus the number of deaths over the year.

Although overseas migration is the most meaningful component of national population growth, the number of net migrants has started to ease.  236,800 net migrants arrived over the 12 months to March 2018; 22,800 fewer than the preceding 12-month period.  Additionally, net overseas migration is tracking well below the previous historic high that was recorded over the 12 months ending December 2008.  Despite the slowdown, net overseas migration remains substantially above the long run average, highlighting that migration from overseas is reducing from a high base.

The flow of residents across state borders is also changing the composition of housing demand.  Queensland is the primary beneficiary of interstate migration flows, attracting a net 24,000 new residents from other states — the highest number of net interstate migrants moving to Queensland since 2007.  While interstate migration booms in Queensland, an exodus of migrants from New South Wales is gathering pace.  20,500 net residents left New South Wales for other states, the largest number since 2009.  

Interstate migration remains strong in Victoria, but has been easing over the past 12 months, while in South Australia and Western Australia, the interstate migration trend remains substantially negative but is slowly turning around.  Meanwhile, Tasmania has attracted the highest number of interstate migrants since 2004.

Interstate migration trends are likely being affected by a combination of changing economic conditions coupled with differences in housing affordability.  For example, the blend of stronger jobs growth and relatively healthy housing affordability are likely to be key ingredients attracting more migrants into Queensland from other states.  

Despite the slippage in both overseas and interstate migration rates, Victoria remains the nation’s population growth powerhouse, recording 137,400 new residents over the 12 months to March 2018.  New South Wales is a distant second, recording a 113,000 population increase over the same period.  Although population growth could slip further across the two largest states, it’s likely that ongoing population growth will be a primary factor in supporting a soft landing across the Sydney and Melbourne housing markets.

Overall, despite a reduction in overall population growth, the demand drivers generally remain strong in Australia, but vary remarkably across the regions.