21 Sep Why it is not really population growth that predicts property demand – Michael Yardney
Apparently, one baby is born every minute and 45 seconds. Sadly, someone dies every three and a half minutes, and the net gain from overseas is one migrant every two minutes. This results in an overall population increase of one person in every minute and 18 seconds. By the time you finish listening to this interview, there will be another four or five people living in Australia. In today’s show Michael Yardney, from Metropole Property Strategists, tells us why he believes it is not really population growth that predicts property demand.
Kevin: There has been a lot written about Australia’s strong population growth and how there’s likely to be twice as many of us in the next 40 or 50 years. That’s a frightening thought.
Apparently, one baby is born every minute and 45 seconds. Sadly, someone dies every three and a half minutes, and the net gain from overseas is one migrant every two minutes. This results in an overall population increase of one person in every minute and 18 seconds. By the time you finish listening to this interview, there will be another four or five people living in Australia.
Michael Yardney joins me from Metropole Property Strategists. Michael, you’ve been looking at this. What’s happening with Australia’s population?
Michael: Kevin, thanks. Population is being measured, and a lot of people who are interested in property want to understand what’s going to happen to that population to understand what we need for property. But I’m going to suggest it’s not just population growth, but we also have to be aware of household formation – how many households we’re forming.
Currently our population, it’s just under 23.9 million people, and it’s projected to increase by 2036 – Kevin, that’s not that far away – to 32.5 million people. The other thing, of course, is our median age is going to go up. We’re going to be older in 2036. The median age is going to be about 40 years of age or so, compared to 37 years of age now.
The other big thing, of course, is that the proportion of older people, people over 65 years, is going to be higher, as well. This means that we’re going to have more people living on their own in the future.
Kevin: You said 23.9 million. How many houses are there in Australia and how many people per household?
Michael: There are currently 9.2 million households, and the average size is 2.58 people per household.
Kevin: With that population growth, Michael, how many dwellings are we’re going to need?
Michael: In the past, we have been building about 164,000 dwellings per year. It is suggested in the five years ahead of us to 2021, our strong population growth underpinned by the migration is going to require 172,000 homes. Forget the population growth – 172,000 households. That’s about a 5% increase in demand in the next five years compared to the last five years.
Kevin: I guess I could ask you questions about whether we’re going to be able to meet that, but I guess we have to.
What does it mean? What are the households going to look like?
Michael: There are going to be fewer people living in the traditional family home, mom and dad and kids. While, of course, there are going to be more of them, the percentage is going to decrease a little bit. Over the timeframe, single-person households are expected to increase by 24% from 2.1 million to 2.5 million single-person households in the next five years.
Kevin: Does that mean that we’re probably going to be building more apartments? I think we can obviously fit more apartments on the land mass.
Michael: Sure, Kevin. More of us are going to want to live in apartments, but we’re also going to need lots more houses. The number of people living in traditional houses is going to increase by about 770,000 over the next decade or so, but the number of single-person households and two-person households is going to increase proportionately more.
Not all two-person households want to live in apartments. Currently, there are 10 million people living as couples in 5 million dwellings in Australia. They come from both ends of the spectrum, Kevin. DINKS (dual income, no kids) – a bit like you and me – and some are going to have kids in the future. But others are actually older empty-nesters – I guess like you and I. Interestingly, these empty-nesters, the older ones, are predicted to grow by 14% over the next decade.
We have to understand what sort of accommodation is going to be in strong demand in the future, because while this is important for the building industry, it’s really important for investors because we want to own the sort of property that is going to be going up in value because other people – owner-occupiers – are going to want to buy them.
Kevin: What does this mean for property investors?
Michael: As I say, demographics I think are going to drive our markets – how we live, where we want to live, the way we want to live. Over the next decade, in my mind, this is going to be more important than the ups and downs of the economy or the fluctuations in interest rates. They’re going to come and go, but the big driver is how and where we want to live.
I think a growing affluent population whose housing requirements are slowly changing is going to underpin our property markets. That’s why I’m confident we’re going to still do well. I think the bulk of the housing market is still going to require the traditional family home, but currently, 40% of the new dwellings that are being built are apartments, and it’s going to be more in the future.
I think that we’re building the wrong sort. I think a lot of these high-rise apartment towers are not where the affluent DINKS or the empty-nesters are going to want to live, and I think they’re going to be the slums of the future.
On the other hand, well-located, medium- and low-density apartments and townhouses in the inner suburbs of our capital cities I think are going to remain the preferred style of accommodation for an increasing demographic of people, and Kevin, I think they’re also going to make great long-term investments.
Kevin: Fascinating stuff. Michael, thank you so much for your time.
Michael: My pleasure, Kevin.
Kevin: Michael Yardney there from Metropole Property Strategists. You can catch up with Michael, too, of course, on his very popular blog site, PropertyUpdate.com.au.
Michael, talk to you again soon.
Michael: Thanks, Kevin.