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Population freeze to cause property price fall
Released 29 March 2011



Real estate prices will fall if the Federal Government uses its forthcoming “sustainable population strategy” to freeze Australia’s capital cities at their current size, according to report to be released today (29 March 2011).   

The People Power report was commissioned by the Urban Taskforce and prepared by property economists at MacroPlan. 
 
Urban Taskforce Chief Executive Aaron Gadiel said population growth was a vital part of a modern capital city.

“The Federal Government has indicated that its sustainable population strategy may declare that some regions have reached their ‘carrying capacity’,” Gadiel said.

“Sydney, Melbourne and South East Queensland have been named and concerns have also been raised about other cities.”

Gadiel said the government does have the power to stop the growth of our major cities.

“It could - if wanted to - prevent new home construction, restrict new infrastructure investment or stop immigrant settlement,” he said.

“But if the government uses those powers our cities, our communities and our national economy will suffer enormously.

“With our ageing population, if a city’s population is to remain static its workforce would need to decline to offset the rising number of people reaching retirement age. “The loss of workers would hit household income, which would feed in to lower property prices.

The report said a government policy capping a city’s population at current levels will lead to an 18.3% decline for Sydney’s residential property prices over ten years, a 15.3% fall for Melbourne and a 14.7% fall for Brisbane.

Gadiel said these projections should not be interpreted as suggesting that Australian real estate prices are likely to fall under current public policy settings.

“The projected decline in residential property prices could only occur if the government made a decision to cap a city’s population at its existing level,” he said.

“These projections are not relevant if existing policy settings remain and population growth in cities is able to continue, in-line with needs of businesses and the choices of households.

“We don’t foresee a US-style collapse in housing, unless the government deliberately uses population policy to engineer one.”