Bernard Salt: Population growth slowing

Bernard Salt, if you don't know who he is you need to get onto him. He's one of the best demographers in the country, partner at KPMG and consults to a lot of the large property firms.

Today, he has an article in the Australian on the weakening Australian population numbers. It seems to me that the two things that lead to high demand for property, and thus high prices, are strong population growth and restrictive town planning policies. Therefore I thought I would summarise some of his key points.

1. Population grew by 1.4% this year. Previously it was pushing 2%

2. Much of this is due to the ending of the mining boom. Apparently even Kiwi's are acking up their bags and heading home

3. This fall in migration MUST have an impact on demand for housing

4. The fall in immigration is not evenly spread with Melbourne and Sydney holding firm

5. The rate of decline is hitting Perth and Brisbane the hardest

6. The net overseas migration rate needed to maintain growth in the property industry is 180,000 which is exactly the current rate (though remember he states it's not evenly spread)

7. The Big Australia scenario of 40 million people is based on this 180,000 figure

8. If the downward trend in net immigration continues to fall year on year this will begin to have a negative impact on Melbourne and Sydney

9. He will accept the bears prognosis of a bubble in Melbourne and Sydney if and when the trend in immigration continues to fall

10. The ABS will release more detailed city by city growth rates in March next year and he expects it to show a decline in Melbourne and Sydney immigration by that stage

11. He believes that the Chinese entrepreneurial class will offset this loss as they seek to set up an asset base in Australia

12. His summary, which is important from some of the discussion heard here, is that Brisbane, Perth and to a lesser extent Adelaide will experience weakening demand for property and Melbourne and Sydney should be okay until the larger demographic picture adjusts demand downwards in those areas.

13. The easy day of ascendant demand for property underpinned by rising migration are over.

Source: The Australian 2.7.2015 p26

Anyway, this is interesting and worrying stuff. Hopefully the immigration numbers turn around.

If anyone doesn't follow Bernard Salt they should, he's on FB and twitter and is considered the go to go guys for demographics. I used to follow him a lot when I was working in politics as he also does some consulting on demographic issues to the major parties.

I would love to hear the thoughts of people on here about his points.

Beelzebub

 

Thanks Beelzebub. Keep posting great articles like this. I use feedly.com to monitor property news articles but 99.99999999% of the stuff is junk/crap/fluff. This is a great piece.

 

Bernard Salt is one of the few people I do like to listen/read as I enjoy the way his mind works and his theories. I don't make decisions on a state basis (ie not invest in Perth) because of his viewpoint but take it into account. He is interesting none the less when looking at large scale markets, trends and demograhics.

 

Many thanks Beelz... I have a lot of respect for his views.

For the popln charts see http://petewargent.blogspot.com.au/2015/06/population-grows-by-330000-in-2014.html

I must be remembered that the govt knows that migration is falling a little & will adjust policy to ensure we continue to get 180,000+ pa. And to anyone O/S our assets are currently as cheap as they were 15 yrs ago.

 

Keith off subject but Pete Wargent is a very good read I follow his blogs. He posted one on RP Data June dwelling prices.
http://petewargent.blogspot.com.au/2015/07/sydney-dwelling-prices-28-mm.html?m=1

 

Declining population growth in Perth is a big problem now that both mining and oil & gas are in the doldrums.

A colleague was telling me that in her teenager's private school class, 11 students have had to pull out as their parents have either moved back over East or have been made redundant.

 

Yep, it seems the gist of this forum is that Perth is done and Sydney is about done too. Everyone now seems to be looking towards Melbourne and Brisbane. Reading what Bernard has to say, it looks like Melbourne might be a better prospect than Brisbane in the short to medium term.

 

So who will benefit the most from population growth in Australia, clearly NSW and Victoria.

http://www.afr.com/personal-finance/who-will-profit-from-australias-population-boom-20150410-1mi5yl

MTR

 

Heard similar stories, mining engineer/executive next door flew back to Melb as he job given the chop, nothing new now.

Unfortunately Perth is in for a rough ride. More reports that property is falling, without doubt related to mining, job losses, population growth etc.

Time to batten down the helms.

MTR

 

Thanks for the report. If the trends continue, will it have a big impact on prices of properties say in Perth and Brisbane? Or likely to be stagnant?

 

Its already happening in Perth, I believe unfortunately prices have dropped back close to 10%.

MTR

 

Bad time for buy and holds in perth over next 18 months I think but good time for value adds and we'll thought out developments.

You need to be very conservative in your feasibility and provide a good quality product that will be in demand.

Basic cookie cutter villa developments won't cut it

 

My thoughts exactly.

 

That in part why my focus has turned to thes markets.

Mtr

 

Its cyclical....Perth will come good in about another 5 years.

 

Yes agree, but if there are opportunities to make money in are markets I would rather play in these, it will only be a matter of time before they turn.

I think I have another 12 months in these markets and then I am out, could possibly be wrong but just going with gut.
MTR

 

Bernard Salt... and more

Australia’s house prices are expected to begin declining in 2017 according to a new report from economic forecaster BIS Shrapnel.

According to the company’s Residential Property Prospects, 2015 to 2018 report, low interest rates will support further price growth in undersupplied residential property markets in 2015/16, but the spectre of tightening interest rates, rising supply and deterioration of affordability will create conditions for price declines in a number of cities from 2017.

How do I read this, and that is if he is right.....I have another 12 months to play in the East. My build should be completed in 7 and currently selling OTP and will be selling my plans and permits another project in Melb hopefully February 2016.

Time will tell, we should come back to this thread in 6 months and find out how this is all panning out.

MTR

 

Regarding demand, I'd add:

• resources boom (semi-localised high demand creating high paying job, possibly not local population growth though; FIFO means changes not just around the mine but also further away like Perth)
• foreign capital (globalisation et al.; no population increase as some/many are investing but not living here)
• federal regulation (monetary; fiscal; FIRB; e.g. limits on buying existing stock vs new stock)
• immigration (which should be included if you're meaning domestic population growth rather than aggregated)
• social mores and changes (aging population; downsizing; McMansions; tiny homes, eco homes)

Don't disagree with the other statements, and especially this one.
But...I don't see property prices being as entirely tied to migration as they have been.
Deregulation, free trade agreements, tariff changes, international affairs, globalisation have all changed the previously (mostly) insular nature of Australian property. Migration is one factor, but only one.
I'd probably change the above to read:

13. The easy day of ascendant demand for property underpinned by rising migration are, as always, dependent on national and international politics and policies.
13a. The days of rises and falls of demand for property, underpinned by a large and increasing variety of factors, continues.

Rob