20 Apr We’re going to have 4.3 million more households in Australia
Here is a staggering stat for you…. we’re going to have 4.3 million more households in Australia by 2036! How will that impact your property portfolio? Today we talk about it with Pete Wargent, buyer’s agent from AllenWargent.
Kevin: It’s been fairly well known and very widely reported that over the next 25 years, into 2036, the population of Australia is projected to soar by more than 10 million heads, or 45%, from 22.3 million to around 32.4 million. Staggering figures, but Pete Wargent from AllenWargent buyer’s agent says that he believes it may be a touch on the low side. He joins me.
Pete: Hi, Kevin.
Kevin: Pretty staggering figures, but you believe they could be on the low side?
Pete: Yes. The ABS recently released its household and family projections, as you referenced there, through to 2036. Around the same time, the Treasury also released its inter-generational report, which shows population assumptions right out to the middle of the century, expecting a population of just shy of 40 million by that time.
I think the key thing to look at, though, is the trend in the assumptions. Over the last four inter-generational reports, each time the immigration assumptions have increased from 90,000 per annum to 110,000, to 180,000, and finally to 215,000. But even these figures, if you look at these benchmarked against the Department of Immigration, they do look to be on the low side and imply that the rate of immigration as a percentage of the population is actually going to fall, which seems quite unrealistic.
At the end of the day, lower immigration would result in slower economic growth, an aging population, and a lower tax take. For those three reasons, I think that you’ll find the immigration rate in the future is pretty high.
Kevin: Some interesting things that I wanted to discuss with you are the outcome of some of these figures and not the least of which the impact on our property market but also the impact on what houses we’re going to be living in the future, which raises another question. In your piece, you talk about lone households. What do you mean by that and what impact is that going to have?
Pete: By 2036, the ABS projects most of us will still live in family households. There will be a huge increase in the number of childless couples, 46% increase, a 47% increase in family households, but the biggest increase of all is expected to be in lone households – from 2.1 million today to 3.8 million. That’s an enormous increase.
This is really a function of two things. Firstly, it’s a function of an aging population. Sadly, more of us are going to outlive our partners, and secondly, it’s related to household wealth. Despite all the doom and gloom that’s reported in the media about falling iron ore prices and so on, record household wealth is recorded in the December quarter. Share markets are at close to seven-year highs, house prices are rising. In short, in a country without punitive inheritance taxes, more people can afford to live alone and therefore more people will choose to do so.
Kevin: What do you see is the impact on the property markets of this shift?
Pete: For one thing, we’re going to need a greater number of dwellings to house an equivalent level of the population, simply because those figures imply a fall in the average household size. I think it will obviously result in a huge demand for medium-density housing, but I think investors need to be wary of a high-rise housing glut. The latest building approvals figures from the ABS suggested that we’re approving high-rise unit blocks at an unprecedented rate, so therefore if I was an investor today, I’d be looking to steer clear of those.
Kevin: What are some of the winner and loser type markets? We’re hearing about a massive oversupply, particularly in the unit market in Melbourne. Is that translating right around the country?
Pete: The number of households projected through to 2036, the biggest number of households required will actually be in Melbourne. Therefore, although there may be an oversupply around the Docklands area, it may only be a short-term thing. The number of required households projected for Melbourne is 938,000 – which is a vast number – through to 2036.
Sydney, will be just behind at 820,000, and the other two markets that are projected to need the greatest number of households are Perth and Brisbane at 698,000 and 519,000 respectively.
In terms of regional markets, it’s mainly a Queensland thing. The property markets that are expected to grow would be the Gulf Coast, Sunshine Coast, and also Mackay, Townsville, and Rockhampton. But New South Wales and Victoria’s regional markets are generally projected to be a slower-growing area.
Kevin: That’s one other point, but we are out of time right now, Pete. I’m wondering whether next week we can come back and we have a look at those two different markets – the capital cities versus the regions – in light of what you just told us.
Pete Wargent will come back again next week. Pete, thanks very much for your time.
Pete: My pleasure, Kevin.