What’s going on guys It's Jordan de Jong here and today I want to talk about the Australian population and how it impacts the property market, we’ll be delving into all sorts of things such as Deaths, Births, and migration but essentially it all comes down to the main drivers of supply & demand. I can bang on about supply and demand all day, but I promise you I won’t talk about supply again after this segment, focusing on demand though, in terms of the property market, this represents the people who want to buy a dwelling to live in, and supply is obviously how many dwellings are in the market, as the population increases so does demand for places to live and therefore so should the number of dwellings. Of course, it all depends on the type of dwellings that there is a demand for, if the population is increasing due to births, then there might be more family members in the immediate family and a two-bedroom apartment or townhouse doesn’t cut it anymore, shift their demand to a larger asset. This doesn’t mean we should be focusing on birth rates to determine when 3 bedroom free-standing homes are going to skyrocket, essentially there is always going to be first-timers, upgraders, and downsizers through the whole market and I wanted to emphasize that demand Isn’t just a one size fits all correlation with population growth. Another common myth I want to bring to your attention is demand versus desire, we would all love to own a dream house in our ideal holiday destination and live there for the rest of our lives, however, majority of us still do need to earn an income and look after our children, requiring us to be close to that source of income or close to good schools. It could just be that the price of the holiday home is simply unaffordable, So although you might think there is a high demand for that holiday house, its actually more of a desire to live there rather than pure demand, a good measure of high demand for an individual dwelling is to rock up on auction day and see 10 or more people actually bidding for the property, that’s demand in its rawest form. So location, housing affordability and life stages all have an impact on the types of dwellings that are in demand, that’s why it’s crucial to dig further into how our population is broken up, rather than straight population growth, but before we get into it don’t forget to smash that like button. According to the Australian Government Centre for Population there two main ways Australia’s population can grow, the first being internal changes in the population also known as the natural increase, this is essentially taking all the births in the country and deducting the deaths. The second way the population grows is by people entering and departing Australia, this is called Net Overseas Migration or NOM for short, and is essentially Arrivals, minus departures. Below that national level, there is a third way that the population can grow or shrink. This is essentially movement within Australia, as called Net Internal Migration or NIM for short and is the same as migration except for between states rather than countries, calculation the difference between arrivals minus the departures, to take it a step further you can think about that same migration between suburbs or even streets. I’m an avid property podcast listener and there’s a ton of commentators who simply state population growth in a specific area within say a 5-year period is a strong indicator of capital growth and leave it just there, seems logical right, as population increases there’s more demand, but there is so much more to this story and even in some cases a false positive. Take brand new house and land estates for example, within 5 years these estates can go from cow farms to peak hour madness, where there are rows and rows of brand new houses, this would, on paper increase the population of people living in that area, but in terms of capital growth, well there’s an oversupply of new dwellings that will get sold first before there is any real growth, and there I go, I said supply again. Whilst I’m already in trouble I may as well talk about apartments, there have been major talks of an oversupply of apartments in Australia, as we have seen cranes blot out the sun in our capital cities over recent years, but construction has seriously slowed down of late and when that type of housing becomes more affordable, demand might well meet supply in the very near future. On top of this, because us Aussie loves our family BBQ’s and backyard cricket, the thought of owning an apartment over a block of land isn’t as enticing, however, If we have migration from overseas where apartments are much more common in their home country, or even preferred, then there’s a growing population of people who are in demand for that type of dwelling. I guess there are two main reasons that inspired me to make this blog, the first is the fact that CoreLogic almost always includes a population growth graph in their monthly reports. Secondly, there’s a video that has been released by Mike Maloney that talks about how the generations before us have had a larger natural population increase, which once their kids reach maximum earning potential in the economy, support their elders in retirement through the tax system. This is why it’s essential to have migration into Australia, the requirement for both parents to now be in the workforce combined with the costs of having kids that seems to be forever increasing, makes considering how many we actually want, if we as a generation start to only have one to two kids, then theoretically we will need other sources of economic stimulation to support us in retirement. The whole point of being a property investor is to obviously not rely on the government in retirement and set ourselves up financially for the future, however, not everyone can become a property investor, it just doesn’t make sense mathematically, so in that sense, we don’t want the economy to be unstable for the remaining retires who will require government support. I’ve taken some statistics from the ABS, of which population projections have been said to be underquoted but looking quite positive based on 3 different scenarios, making assumptions of fertility, life expectancy, overseas and interstate migration flows, Series a being higher assumptions, Series B being medium assumptions and series C being lower assumptions. If we take the Series A example from before and drill down to the state level, we can see the state-based predications, as we can see between 2027 and 2066 the gap in population between NSW and VIC starts to shorten and predications of Victoria becoming the largest city have been forecasted, with around 14 and a half million people in 2066. This isn’t to say that Victoria is going to be the next big hot spot due to increasing population demands, we do have much more land heading north to continue to build out, but there is some recent data of NSW having negative interstate migration and VIC having positive interstate migration. This isn’t suggesting that everyone is moving to VIC, there are other states with positive interstate migration, but I guess this is why those commentators comment on population growth as a big driver, but remember there are two parts to demand and SS, well I’m not going to say it again, just remember we can build up and out further. I guess in wrapping up, back to the center for population their focus is to improve Australias ability to cope with a growing population, they have produced documentation around this and it's not a bad read to try and understand where these population hot spots are, and in turn what government spending they are doing to deal with a growing population. Specifically, things like like this statement about divesting 127 hectares of land in Maribyrnong in Melbourne to cater for up to 6,000 new homes within 10KM of the CBD, subject to the approved planning framework.. but being someone who walks around the Maribyrnong every day I find this very interesting I this sort of impact. In final statements, I think its best to take a holistic view of how a growing population will play out in Australia, fundamentally people want to go where the jobs are, however, we are becoming a very technology-based working environment, with working from home and AI taking over some jobs, demand to be extremely close to the CBD may fizzle down. On top of that, there are larger working hubs being established outside of CBDs and government spending on public transport such as the fast train will allow quicker access into out CBD’s making the commute acceptable. I'm not suggesting that this would decrease the demand for housing close to our CBD’s but it will essentially be too unaffordable for the average income earners. As always, seek your own professional financial, legal, taxation & property investment advice for your current situation, these blogs are just my opinion and general in nature and should never be considered personal advice. Until next time, happy house hunting.

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