Roger Montgomery penned a nice “fundi-style” piece on house prices over the weekend:
By looking into the near future’s supply and demand balance, we can reach some reasonably confident conclusions about prices. Sure, there might be exceptions to the findings of basic supply and demand analysis, but exceptions by there very nature are unusual and typically aren’t sustained. And we also don’t need to be too precise.
What we know of property is that demand is determined by household formation. Indeed, demographer Bernard Salt said as much in this publication in August 2014. According to 2015 Australian Bureau of Statistics report, entitled “Household and Family Projections, Australia, 2011 to 2036”: “The number of households in Australia is projected to increase from 8.4 million in 2011 to between 12.6 million and 12.7 million in 2036.” The implication of this is that households will form at the rate of 1.65 per cent a year, which is higher than the 1.52 per cent growth rate previously projected by the ABS in 2010.
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