26 Oct What this slowdown is going to do? – Michael Yardney
Recently the Australian Bureau of Statistics warned our population growth is slowing. So does slowing population growth pose a risk to property? Michael Yardney, from Metropole Property Strategists, discusses whether this slowdown pose a risk to our economy and pull the rug out from under our property markets?
Kevin: Recently, the Australian Bureau of Statistics warned that our population growth is slowing. I’m just wondering what this slowdown is going to do. Could it pose a risk to our economy? Maybe pull the rug out from underneath our property markets?
Let’s find out. Michael Yardney from Metropole Property Strategists has a view on this.
Michael: Hello, Kevin.
Kevin: Michael, I think you may have written about this in your blog, Property Update, haven’t you?
Michael: Yes, I did. It should be on the mind of all smart property investors.
Kevin: What do the population figures show?
Michael: Firstly, the Australian Bureau of Statistics estimates our population growth is now at about 1.4% per annum. That’s much lower than it was a while ago, and the whopping majority of those people are actually in the four big states – New South Wales, Victoria, Queensland, and Western Australia.
Kevin: This is the lucky country; why don’t they want to come here? How much is it slowing?
Michael: It’s really due to lower migration. We still have more natural population growth – we’re making more babies than people are dying – but people aren’t coming here as much, migration has slowed down. We’d only added about 143,000 people from overseas last year.
Kevin: Has it got anything to do with the end of the mining boom?
Michael: Yes, you’ve picked that well. The mining boom brought lots of new migrants to Australia, and the figures from the Bureau of Statistics show the impact of the mining investment slowdown has made the resource focused states – particularly Western Australia and the Northern Territory – drop in migration considerably. In Western Australia, it’s dropped 71% over the last couple of years.
Kevin: Goodness, gracious. Something is obviously having an impact there. Is it a problem, Michael?
Michael: Let’s put it in context. Australia’s population still increased last year by more than 316,000 people. If you look at the world in general, we still have one of the fastest growing populations amongst the advanced economies. It is well above the long-term averages, but over the last couple of years, we’ve just had massive population growth related to the mining boom jobs creation needing people to come in to support the boom.
Kevin: Before we get to its meaning for property, Michael, what’s it going to do to the economy?
Michael: I think there’s some positives and negatives, Kevin. On the positive side, what it has done is keep unemployment on the low side. Remember a while ago when people were talking about an unemployment rate of 8%, 9%, or 10%? Well, that didn’t really happen.
The other positive is that it’s going to keep our Australian dollar on the low side, and I think this has a couple of positive impacts. First of all, we’re going to have more overseas visitors coming here because a low Australian dollar is going to be cheap for them. That’s good for our economy. It also probably means that Australians are going to travel more extensively domestically, rather than overseas. That’s also good for our economy.
I think the last upside of our slower population growth causing a lower Australian dollar is that Chinese capital is still going to come in, and they’re going to look for investments locally.
On the downside, a slower population growth means we’re going to have a slower economy, which – depending on which way you look at it – is probably going to leave interest rates on the low side, maybe even having to drop a bit to stimulate the economy, because we haven’t got more people consuming.
Kevin: What’s the direct impact to property, Michael?
Michael: Possibly the biggest impact from population growth undershooting expectations is that during our recent housing boom, we’ve been building lots more houses, and there are so many on the drawing board and so many coming out of the ground, and they’re for people who may not even show up. That’s potentially one of the issues in some locations in Australia, particularly in the CBD and the off-the-plan and a lot of those new house and land package areas.
Kevin: The bottom line, Michael?
Michael: We’re told our federal government is keen to get us back into surplus from having a budget deficit, but a slower population growth, slower economic growth, is going to make that a lot harder for us.
I think some segments of the property market are going to find themselves in surplus. This happens every property cycle, doesn’t it Kevin?
Kevin: Yes, it does.
Michael: Times are changing, so I think one is just going to have to look more carefully at which areas are going to have economic growth, which areas are going to have wages growth, and know that it’s not going to be all over Australia. Our population growth is fragmented, creating jobs growth fragmentation, creating economic and property growth being fragmented into different segments.
Kevin: So the answer is: keep listening to Real Estate Talk, and keep reading Michael’s blog, PropertyUpdate.com.au.
Michael: Thanks for that great plug, Kevin.
Kevin: Thanks, Michael. I’ll talk to you again next week.
Michael: My pleasure.