Guest The Pom Queen Posted May 14, 2016 Share Posted May 14, 2016 What are the big demographic issues that will shape the market for Australian property and business over the next decade? This issue is always more easily interpreted in hindsight than it is predicted. A decade ago in pre-GFC Australia an astute assessment of demographic factors shaping the economy would have cited the imminent rise of China, an escalation in net overseas migration, the advent of the mining boom as well as broader economic transformation affected by new technology. More broadly a decade ago an astute observer of the Australian people might have pointed to possible behavioural changes shaped by universal connectivity. Some businesses have collapsed whereas others have arisen because of the advent of, for example, the smart phone. The mass market now researches, purchases, connects, navigates and forms relationships through technologies and platforms that weren’t invented in 2006 or considered mainstream. How the world can change within a single decade. The most important demographic game-changer that could shape the demand for Australian property over the balance of this decade is the continued diminution of net overseas migration. The days of “big Australia” are long gone. Net overseas migration peaked at 300,000 in the year to June 2009. The number required to deliver the big Australia scenario of 38 million by 2050 is 180,000. In late 2009 the then prime minister, Kevin Rudd, made his “I believe in a big Australia” statement that triggered a national debate about levels of migration. At this time the mining and resources boom was well underway. During 2010 and 2011 net overseas migration slowed but then recovered to a recent high of 227,000 in the year to June 2013. Australia’s total growth in this year was 390,000 driving demand for household formation in all capital cities and also in several remote mining communities. Since then net overseas migration has dropped to 168,000 for the year to June 2015. Total growth for the nation in this year was 317,000; in just two years the national population growth dropped by 73,000 or 23 per cent. And yet oddly despite this clifftop-drop in Australia’s rate of population growth the number added to Sydney and Melbourne continued to track more or less the same at around the 80,000 and 90,000 marks respectively. Quarterly data is available for September 2015 that suggests net overseas migration is still falling. For the year to June 2015 this figure was 168,000; for the year to September 2015 it declined further albeit by a few hundred people. Who knows what this figure is currently but the property industry should hope that September-to-December represents the nadir of the cycle The demand for residential property in our two biggest cities is being sustained not by strong overseas migration but by interstate migration flows of workers scrambling for knowledge-worker-connected job growth. Net interstate migration to Queensland for the year ending September was 7000; this compares with net growth of 29,000 a decade ago. Indeed there is the distinct possibility that net interstate migration to Queensland has in fact turned negative for the first time since 1947. Data to be released on June 23 will confirm whether Queensland is losing residents to interstate destinations for the first time in two generations and if net overseas migration is still dropping. The reason for the drop-off in net overseas migration is of course the collapse of the mining boom; we simply don’t need as many 457-visa workers as we did four years ago. Plus there has been a diminution in the Kiwi intake. The Christchurch earthquake in 2011 later kickstarted a construction boom in New Zealand that improved job prospects on that side of the Tasman. Aussie-based Kiwis headed home as a consequence. Last financial year Australia’s net Kiwi intake (NKI) was 6000; at the peak of the mining boom in 2013 the NKI peaked at 33,000. The outlook for property demand across Australia and especially in the booming Sydney and Melbourne markets is in fact tied to falling levels of net overseas migration. There’s only so much growth that can be commandeered by Sydney and Melbourne by drawing in workers from interstate. What is required is a reversal of the trend in net overseas migration; this number needs to be pushed back towards the 180,000-mark in order to sustain housing demand and to absorb housing supply. The demographic lever that has the capacity to expose oversupply in the big-city residential property market is net overseas migration. If that level drops much further (ie below 168,000, down from 300,000 six years earlier) then I suspect that the Sydney and Melbourne property markets will be affected. This means that there could well be an uncomfortable time-lag between the supply of residential product and the market’s ability to absorb supply. It all hinges on whether the population growth is rising or falling. Another big-picture demographic issue shaping the demand for property is the potential for an uptick in the number of visitors from China. Australia’s largest visitor (tourist) market is the 1.3 million Kiwis travelling backwards and forwards across the Tasman and largely staying with friends and family. It is conceivable that by the end of the decade the largest international visitor segment will be the one-million-and-rising Chinese visitors who have very different spending patterns to the New Zealanders. Amped up Chinese visitor numbers to Australia will be channelled through cities that offer direct flight access to China’s biggest and second-tier cities. Australia’s lifestyle and tourism property sector could be fundamentally transformed by a Chinese middle class passing into a spending zone that triggers demand for overseas travel to exotic places such as Australia. There are a range of factors that can impact the demand for Australian residential and commercial property over the coming decade. Those cited above — net overseas migration and Chinse tourism — may be augmented by policy and behaviour shifts that have yet to fully unfurl. Regardless of the factors that actually shape the demand for Australian property in the future the underlying bedrock is always based on shifting aggregate demographic trends. Bernard Salt is a KPMG Partner based in Melbourne and an adjunct professor at Curtin university Business School; http://www.bernardsalt.com.au; bsalt@kpmg.com.au Link to comment Share on other sites More sharing options...
starlight7 Posted May 15, 2016 Share Posted May 15, 2016 When a Chinese stranger can sit next to you on a plane and offer to buy your house, sight unseen, for a million dollars there is something seriously wrong with the country. Politicians why don't you stop selling our homes to overseas investors? Link to comment Share on other sites More sharing options...
Guest The Pom Queen Posted May 15, 2016 Share Posted May 15, 2016 When a Chinese stranger can sit next to you on a plane and offer to buy your house, sight unseen, for a million dollars there is something seriously wrong with the country. Politicians why don't you stop selling our homes to overseas investors? Hey, I wish i had such luck with who sits next to me on a plane :laugh: Link to comment Share on other sites More sharing options...
starlight7 Posted May 15, 2016 Share Posted May 15, 2016 It was a friend of mine. He asked her what suburb she was in and when she answered that was what he said! She was sure he meant it. He would have knocked her place down and built an apartment block. Link to comment Share on other sites More sharing options...
scuffythetugboat Posted May 15, 2016 Share Posted May 15, 2016 The week before Easter my wife flew from London to Perth via Dubai. The second leg to Perth was practically empty. All the passengers in zoo class had the option of lying on a row of 4 seats. Link to comment Share on other sites More sharing options...
AJ Posted May 15, 2016 Share Posted May 15, 2016 When a Chinese stranger can sit next to you on a plane and offer to buy your house, sight unseen, for a million dollars there is something seriously wrong with the country. Politicians why don't you stop selling our homes to overseas investors?That would be your own greed not the politicians! You could always say no if you were that concerned! Link to comment Share on other sites More sharing options...
Pommie Posted May 15, 2016 Share Posted May 15, 2016 That would be your own greed not the politicians! You could always say no if you were that concerned! The point being made is the Australian government has allowed Chinese buyers to purchase existing homes in addition to off plan homes... the result is that the bubble gets blown ever bigger, banks lend even more to cover the mortgaged portion of ever growing house prices and locals get either squeezed out of the market even further or are forced to load up on debt..!!! I have a mate who works in one of the big four banks. Four years ago he challenged, how can we be selling so many homes to the Chinese, when there own government treasury rules limit foreign currency transfers out of China to $50k... yet, they stump up deposits for billions of dollars worth of property... He was told "don't worry about it"... If the Australian government managed foreign investment properly, it would only be used to stimulate new build construction, supporting the construction industry whilst at the same time adding to supply... Link to comment Share on other sites More sharing options...
Peach Posted May 15, 2016 Share Posted May 15, 2016 The point being made is the Australian government has allowed Chinese buyers to purchase existing homes in addition to off plan homes... the result is that the bubble gets blown ever bigger, banks lend even more to cover the mortgaged portion of ever growing house prices and locals get either squeezed out of the market even further or are forced to load up on debt..!!! How is this any different to London? People seemed used to the idea that living in London / the SE is out of reach for many - but are outraged at the same happening in Sydney and Melbourne? Link to comment Share on other sites More sharing options...
starlight7 Posted May 16, 2016 Share Posted May 16, 2016 Greed doesn't enter into it- my friend refused of course and even if she had been 'greedy' as you so eloquently put it, that is not the point! Link to comment Share on other sites More sharing options...
movingback Posted May 16, 2016 Share Posted May 16, 2016 That would be your own greed not the politicians! You could always say no if you were that concerned! But it would never happen. No-one in their right mind would turn down millions of dollars if it was legal. If you did, someone would just buy it from you 'cheap' and flog it the next day to the highest bidder. This is why we NEED the Australian government to grow some balls and stop foreign investment and rampant speculation in property. It needs to be made illegal. For the good of the country. Link to comment Share on other sites More sharing options...
Guest hill billy Posted May 16, 2016 Share Posted May 16, 2016 The week before Easter my wife flew from London to Perth via Dubai. The second leg to Perth was practically empty. All the passengers in zoo class had the option of lying on a row of 4 seats. Same thing happened to my sister going the other way Melbourne to London, the second leg to London she had a row of 4 seats to her self. Link to comment Share on other sites More sharing options...
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