Analysis of Melbourne growing population & housing market

Image by moerschy

Melbourne population is continuously increasing. This year Melbourne crossed it’s five million mark, accounting to nearly twenty per cent of Australia’s total population. My analysis reports that in eighteen years, the number of people in the regions of the City of Melbourne (1.7 million), Melbourne CBD (0.5 million) & Southbank (0.2 million) is going to double.

This growing population poses unforeseen challenges and likewise, business opportunities for different parties. In this article, we will look at this situation from four different perspectives. Accordingly, I will share actionable insights for each of these four different user groups.

User groups

1. Buyers, Sellers or Renters of property (Also real estate agents)

Buyers: I was interested in this group, as I plan on buying a property in Melbourne someday. Also, this analysis will help me & many others like me to select the right suburb.

Sellers: I wanted to identify areas which will saturate with people in the future. So old retirees who are asset rich and cash poor can plan to sell their property and move to cheaper suburbs.

Renters: I wanted to help people who live in rented apartments and work in the city to find areas with cheaper living options.

2. Home loans and mortgage providers — Banks

For my dream of buying a house in Melbourne to become a reality, I would need to apply for a home loan. So, the second interested party would be the banks. These insights will help the banks to target people in growing suburbs for property development loans. Likewise, they could provide funding to property builders.

3. Property builders

The forecasts on area-specific population growth will help property builders to identify regions which are likely to grow in the future and invest in projects in those regions. There will also be opportunities to build more multistoried apartments or hotels in areas which are getting saturated with the population growth.

4. City council

Zooming out a bit more, I realised the Victoria government would be another interested party for these insights as it will help them plan for the required infrastructure for the growing population.

Figure 1: The target audience for this analysis

Research Questions

There is so much we can do with population & housing data, and below are a list of top three questions I will answer in this article:

1. Will the housing industry be able to keep pace with the growing population?
2. How are different regions doing in terms of population growth and housing demand?
3. What is the correlation between population & households for different regions?

I’ve created a quick motion chart and hosted it on AWS, if you would like to visualise or play with the data yourself, you can click here.

Data Source

Before getting into the analysis, I would like to declare my sources. I have merged three different datasets from Melbourne open data website, and these data sources are:

1. City_of_Melbourne_Population_Forecasts_2016_to_2041_-_Age_and_Gender
2. City_of_Melbourne_Population_Forecasts_2016_to_2041_-_Dwellings_and_Households
3. City_of_Melbourne_Population_Forecasts_2016_to_2041_-_Household_Types

Disclaimer: All insights are based on the descriptive analysis of the data. I do not assert for the quality of the data & I don’t claim to be an expert in giving real estate advice. Please take the following recommendations with a pinch of salt. (You can add lemon and tequila, that’s up to you :))

Analysis

I used Power BI to visualise the data and generate insights.

Region-wise population & building growth

The first graph below shows the trends of the growing population and the total number of structured dwelling in different regions in Melbourne.

Graph 1: Region-wise population & building growth

Top three observations from the above graph:

1. Melbourne City (black) accounts for 50% of the total Melbourne population
2. Availability for housing is starting to saturate in the Carlton (green) region. Whereas, Southbank (grey) or Docklands (red) are a better alternative for people preferring to stay near the city
3. Docklands (red) and North Melbourne (purple) present excellent investment opportunities for real state investors in the next five to six years.

Overall, it’s good to see that the rate of population growth will keep pace with the number of houses in different regions, which answers our first research question.

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We can go a step deeper to analyse the difference in growth rate between occupied & vacant houses.

Occupied or vacant houses

Graph 2: Occupied or vacant homes

Top three observations from the above chart:

1. In the next two years, there will be a sudden growth in the number of empty dwellings in Melbourne City (black), Southbank (grey) & Docklands (red)
2. Above graph reinforce that Carlton (green) area is going to saturate & Docklands (red) is soon going to be the fourth most populated region in Melbourne
3. Port Melbourne (pink) & Kensington (thin black line) are going to grow as residential areas in fifteen years.

As we deep-dived into different house type, we can also deep dive into people living in private and non-private dwellings. Below are some examples of private and non-private dwelling types.

Examples of private dwellings are: Houses and flats

Examples of some non-private dwelling are: Hotel, motel, boarding house, private hotel, public hospital (not psychiatric) and childcare institution

People in private and non-private dwelling

Graph 3: People in private and non-private dwelling

Top three observations from the above graph:

1. There’s an interesting contrast between people staying in private and non-private dwelling. There’s about 20% growth in non-private dwelling in Melbourne city (black) between 2018 to 2019. And this might be because of more hotels and student accommodations
2. There will be more hotels coming up in Melbourne CBD (sky blue) & Carlton (green) region in the coming years. These regions growth will be followed by Parkville (navy blue) & North Melbourne (purple) at a steadier rate
3. Southbank (grey) & Docklands (red) will be the preferred areas for people with private dwelling type housing. Which makes me believe that these regions are occupied by people with families

Next, let’s look at a derived field of the vacancy rate, which is calculated by taking a ratio of vacant houses by the population in that region.

Vacancy rate by year

Graph 4: Vacancy rate by year

Top three observations from the above graph:

1. One sector that stands out in this chart is the Port Melbourne (pink) area. By 2021 many people who want to live near the city and don’t want to pay extravagantly on rents can find solace in moving to Port Melbourne region. The growth in the Port Melbourne area also poses challenges for the City council to develop the required infrastructure
2. The average vacancy rate across all region is 13%, with West Melbourne Industrial (rose) being higher than average (15%). That means, West Melbourne would have cheaper housing compared to other areas
3. Surprisingly, Melbourne CBD (sky blue) & Southbank (grey) also have a vacancy rate higher than average. But this is likely due to the higher housing availability and high rent pricing in those regions

Let’s take a pause here and look at the different comparisons we have explored until now.

Figure 2: Analysis overview

Now moving to the final research question for this article, and finding the correlation between population and housing for different regions. I’m switching gears and moving to python to get the answers.

Figure 3: Housing vs. Population correlation by region

Top three observations:

1. For most of the areas, the correlation is substantial, nearly close to one. That is a good sign in terms of house availability
2. Areas of Carlton and Parkville shows a slightly lower relationship between population and housing compared to other areas. Which means the housing and population might not keep the same pace
3. Port Melbourne shows the strongest correlation amongst the lot. Which means, If I have to invest I’d buy a flat in Port Melbourne and enjoy a beautiful sea-facing view form my future (dream) apartment

Conclusion

In this article, we analysed the growing population & housing trends from four different perspectives and generated actionable insights for these four different user groups. This article helped us develop a better sense of how different regions in Melbourne are growing. Also, provides data-driven intelligence for various parties to make suitable investment decisions. More than anything, this article is an example of data-driven storytelling and value generation from openly available public datasets. I would embark on more such data exploration adventures, so follow my blog for more such stories.