Population ponzi tramples Chris Kohler

We like Chris Kohler’s attempts to bring rationality to the housing bubble. Except on one point. Recall this:

Now, today, get this:

UBS analysts, meanwhile, note Australian people growth is strengthening despite a recently rising Australian dollar, which would usually make Australia a less attractive destination, and sees upside for housing demand.

“This continued people boom is likely to offer more support than expected for housing and vacancy rates, particularly in Melbourne which is experiencing record high population growth,” economists George Tharenou and Carlos Cacho wrote in their report.

Of course difficulties can arise when cities can’t keep up with the growth, according to demographer Mark McCrindle, who notes Melbourne is seeing the equivalent of an entire Ballarat added to it each year through overseas and interstate migration.

“You can become a victim of your own success,” Mr McCrindle told Domain.

“And when the public transport does start to groan, when the infrastructure doesn’t keep up with that massive growth … you start to get the pain points. You start to get people feeling a bit of a loss of lifestyle and a decline in liveability.”

“A great strength can become a weakness over time.”

Australia’s soaring headcount should be seen as a huge opportunity for the economy to expand, but demand for housing and public infrastructure should be viewed under the scope of “people growth”, not “population growth”.

Alas, we see Melbourne headed into a rental crisis thanks to the population ponzi. As shown in the next chart, the annual growth in median rents across Metropolitan Melbourne increased to 4.2% in the year to June, with a clear upwards trend evident:

Meanwhile, the proportion of new rental lettings ‘affordable’ to lower income households was just 6.6% in June – an improvement from the 5.8% recorded in the prior quarter but way down on the 12% recorded in 2012 and 2014:

The escalation of rents and the shrinkage of ‘affordable’ rentals comes as Melbourne’s rental vacancy rate has tightened to 2.2% from 3.2% in 2013, 2014 and 2015:

It also follows a collapse in the number of new rental lettings across the state:

The driver of the surge in Melbourne rents is clearly record immigration-fueled population growth, which has drove an insane 150,000 increase in Victoria’s population in the year to March (circa 130,000 in Melbourne):

And such strong population growth has clearly overwhelmed the record level of construction that has taken place across Melbourne:

The scary thing from the chart directly above is that Melbourne dwelling construction has already begun to roll over, which means that vacancy rates will likely tighten further, driving further rental cost escalation and a further evaporation in affordable rental homes.

This is pure evil by Australia’s policy makers. Not only has mass immigration robbed Melbourne’s youth of the opportunity to purchase a home, but it is driving up their cost of living via rents as well.

Time for you to roll over, Chris, and admit your ignorance. If you’re against the housing bubble then you need to be anti-population ponzi too.