Home' API Magazine : July 2014 Contents DASH OF SALT // BERNARD SALT
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Ihave entered the movie business. Well, the video clip business.
Okay, okay, I feature in a five-minute video with really cool
animated demographics. The clip is called Business Beyond
2014; it’s downloadable and it’s designed to be shared.
I don’t think the Logie set need fear me as a competitor for
their jobs but the substance of the clip is crucial for business
and investors. It identifies ascendant demographic trends and it
speculates what the business and policy implications might be.
Not so much way off into the future but over the short to
medium-term. What will be the underlying macro demographic
forces that will shape the business and investment environment
over the decade to 2024? See, I already have your attention. I
have developed a 100-year dataset that shows annual growth for
each year of the lifecycle over the century to 2050.
Theoretically I could track net growth in the 45-year-old
population over 100 years. I’ve scanned this dataset, drawn from
Australian Bureau of Statistics historic and projected populations,
to identify three segments that are set to surge over the coming
decade which are kids aged five to 17, household formation aged
30 to 44, and retirees aged 70 to 79. I’ll come back to the property
implications of these trending demographic tribes later.
What the video clip doesn’t talk about due to time constraints
is the bits in-between the surging segments: the 18 to 29 group
and the 45 to 69 group, not to mention the babies and infants
group aged zero to four years.
By omission, my cool video clip doesn’t tell you that net growth
in the 20-something market will flatline over the next decade.
The market for student accommodation must subside. As indeed
must the market for upsizing, where 50-something parents put
on an extension to accommodate their stay-at-home kids.
And at the other end of the scale, a flatline 50-something
segment probably means the demand for holiday houses will
remain subdued for a decade.
On the other hand, the segments set to surge include
30-somethings who I think will split into the traditionalists
who will want a four-bedroom, two-bathroom McMansion in
the ’burbs and the progressives, who will want an uber-chic
apartment in the inner-city.
Then there’s the five to 17 group – more teenagers and more
primary school kids. Perhaps there’ll be a rising market for chic
apartments with three bedrooms? Or even apartments with
Finally, the surging 70-something segment contains our old,
old friends, the baby boomers. What will they want in their
golden active years? I think they’ll want to downsize: come out
of their rambling suburban house and buy at whatever cost a
convenient, minimalist townhouse or apartment within the area
they’re familiar with. Not so much high-rise but a ground-level
townhouse perhaps with a bit of a garden. Super!
Taking this macro demographic view of the future as outlined
in the clip, perhaps the type of property to invest in is as
follows: middle suburban property with four bedrooms and two
bathrooms as generation X parents manage the demands of an
extended teenage household.
Perhaps, there’ll also be demand for affordable housing out in
the suburbs. However, as there’s no real limit on the outward
extension of the city I don’t see this as a good investment
option. Perhaps, the household formation product that’ll be in
demand will be three and four-bedroom inner-city property.
In one sense there’s a natural synergy between 70-somethings
wanting to downsize and 30-somethings looking to secure
accommodation for a family with teenagers.
Whichever way you look at the demographic trends there’s
simply not enough well-to-do Xers coming along in their 40s,
and eventually their 50s, to apply price tension on holiday and
seachange property bought last decade.
I see the next decade as being framed by pragmatic shifts
in the population. Bigger apartments, more affordable
housing, renovations and extensions to existing properties
in middle suburbia. I also see a diminution in demand for
In a policy sense, the macro demographic trends suggest a
rising need for primary and secondary schools and teaching
staff, for more assistance for first homebuyers, for more funding
to support the age pension and utility concessions. All of this
doesn’t come without pain and, in fact, it will translate into an
environment of generally rising taxation.
There are bright spots. The macro demographic outlook shows
more 30-somethings and more teenagers.
We’re a young and vital nation with
scope for growth and hope for the future.
Australia is a good place to invest and
with rising population levels driven by
immigration, the housing industry and
property investment should be a good
business to be in.
The challenges over the coming decade
will be as much to change the way people
think about the contract between the
individual and the state. The productive
population and the investment community
generally will be paying more tax in the
future. And that’s all the more reason
why investors need to consider macro
demographic trends and other factors
when making investment decisions. API
Founder and head of KPMG Demographics; firstname.lastname@example.org
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