The Finance Bible

#93 Population Shifts and Market Trends Revealed with Zeke

• Zeke Guenthroth and Oscar Don

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Curious about the secrets behind the skyrocketing property market and its implications on your investments? Prepare to uncover the driving forces behind the significant increase in property dwelling sales and the dramatic reduction in housing supply. With insights drawn from trusted data sources like SQM, CoreLogic, and the ABS, we chart the market's transformation from a six to seven-month supply in 2011 to a lean 3.1 months today. Learn about the 6.9% annual growth rate in detached houses, and 5.5% in apartments, and how these trends are reshaping the property landscape. We'll also highlight how recent global events have influenced property values and identify the regional winners and losers of the past financial year.

But that’s not all – we also tackle the profound shifts in population dynamics. Discover how the COVID-19 pandemic has impacted immigration rates, causing a spike to 650,000 immigrants as part of a catch-up process rather than a new trend. We delve into the concerning drop in fertility rates, which have remained below the replacement rate since the 1970s, now standing at 1.58. Factors such as economic pressures, evolving societal roles for women, and rising living costs are discussed in detail. Be sure to tune in next week for an in-depth discussion with our special guest, Don, who will provide further insights on these pressing issues. Hit follow, subscribe on your favorite platform, and share this episode with anyone keen on understanding today’s property and population trends!

For any enquiries or to connect with Oscar, Zeke, or their company, Asset Road, listeners can visit the following links:

The advice shared on The Finance Bible is general in nature and does not consider your individual circumstances. The Finance Bible exists purely for educational / entertainment purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.

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Speaker 1:

Welcome back to another episode of the Finance Firewall podcast Zeke here, and your co-host Oscar.

Speaker 2:

But before we get into it, please note that nothing in this podcast should ever be considered as personal financial advice, of course, if that is what you are seeking reach out.

Speaker 1:

We'll get you in touch with the correct professionals get the job done properly.

Speaker 2:

Sit back, relax and enjoy the show. Let's get into it.

Speaker 1:

Welcome back. Today. It's just me. There's no Oscar, as you would have learned last week. I'm currently up north mia, but rumor has it I am such a delightful gentleman that I'm going to give you the pleasure of still hearing my wonderful voice, even though I won't be joined with oscar today.

Speaker 1:

We're just going to be talking into things, really just an overall outlook on property, the market, things like that kind of where we're heading, a little bit of statistics that you probably don't know at the moment. Let's jump into it. This is going to be done based on research from ourselves, or myself in this scenario, where it's all from resources like SQM, corelogic, reia, matusic, abs. There's probably others in there that I haven't mentioned, but they're the main ones that we tend to have a look into. Jumping straight into property dwelling sales have actually risen substantially in the last couple of years. I think we all gathered that, but in the three-year period, 1.8 million sales have basically occurred, versus 1.3 to 1.4 million in the previous three years before. That. It's a fair increase. We're seeing that sales are starting to increase and people are really beginning to sell more. Why is that? Well, we'll probably find out soon as we go on through all of the statistics and data that we're going to read through.

Speaker 1:

Supply for housing is part of what's going on here. So, in terms of months, based on sales in 2011, it was six to seven months worth of how much supply there was currently on the market. So, for example, if I went to market today, nothing else came on the market, there would have been back in 2011 about six to seven months worth of supply. It floated close to five months, as in. It dropped a little bit between 2014 and 2020. To five months, as in. It dropped a little bit between 2014 and 2020. It's now sitting very low at about 3.1, halved in the last 10 years, or 15 years give or take.

Speaker 1:

There's only roughly 165 000 for sale listings at the moment. It's important to note that that is after you remove ones that have been on the market for more than 180 days. So anything that has been on there for over 180 days, it's well and truly out of cycle. It's not actually selling like an average property. It's not really something we can account for in that $165,000 for sale at the moment or at the time of doing the research, and that will only last 3.1 months, so half of what it was in 2011. Although the dwelling sales have actually increased, the supply has decreased. That's a very interesting one to look at. People are really starting to take action. We know that there hasn't been enough houses built recently, which has been going on for a while. We know what's going on in terms of how many people, how many residents, are living per house and things like that. Dwelling values on detached houses are $1 million nationwide, as in the median dwelling value, which I find quite interesting.

Speaker 1:

I brought this up on another podcast not too long ago, actually, since 2000,. There's been extreme events between 2000 and 2024, which we're currently in. So there's obviously 9-11. You've got the us invasion of iraq. You've got um tsunamis occurred, like the indian ocean tsunami I think that was back in like 04. Uh, the gfc, obviously the whole bin laden shenanigan. Uh.

Speaker 1:

You've got the bre referendum. You've got Trump in office. You've got COVID-19. You've got the capital riots. You've got Russia and Ukraine. You've got Israel, hamas. You've got China, taiwan and everything else that's occurred. That's just to name a few.

Speaker 1:

But all of these events have happened and they're all major events, right, but the property market has still returned average since 2000,. 6.9% annual growth rate. In other words, it's multiplied 3.6 times since 2000,. 3.6 times. Apartments are now sitting at a medium of 654,000. They've been growing about 5.5% annually in the same timeframe, reflecting about a 2.5% overall times multiplication or increase. It's interesting because previously what we've kind of agreed on as a whole in terms of industry and research and professionalism is that property cycles are generally about eight years. However, what we've noticed since about 2000 is the cycles have been rapidly increasing, more like four or six years and in between that I'd suspect that's due to the information age, how reactive everyone is, how quick we get information now, and basically I think people are a lot more volatile now, like if something happens, we're very quick to react and assume things and act quickly on that information as we process it. I do think that will continue to speed up and we might end up having in the next 10 years, maybe three property cycles within that period, especially if big events keep happening as quick as they're happening. We know how quick things can happen now, just in those 24 years, all those events I mentioned and think about the more recent ones since you know, 2020, what's happened then?

Speaker 1:

In terms of last financial year, detached housing prices have obviously changed. Some were positive, some were negative. The losers in this scenario were Canberra, which was barely Hobart about 5%, and Don's favorite place, actually copying a big 7% loss. Melbourne did suffer more than others, which was due to politics, schemes, price point and basically federal decisions or local government decisions. As opposed to other areas, winners were Sydney, you know, 7%, brisbane 8%-ish, adelaide just over 9% and Perth was about 15%. Darwin was about 2%, but not really relevant For apartments and townhouses. So going off houses, sydney, melbourne, canberra and Darwin were all not worth really talking about. Their changes were virtually nothing, not worth really talking about. The changes were virtually nothing. However, hobart had about a 6% drop and Perth was up about 6.8%, brisbane 13% and Adelaide 14.3%. Quite a few gains there for some areas in the apartment and townhouse space.

Speaker 1:

Other areas, not so much specific regional hubs, did better in terms of overall percentages. Okay, so not actual number in terms of, you know, 100k or 200k or 300k, but in terms of a percentage of their overall price and what growth they had. It was more gold coast, sunshine coast, townsville, cairns, all floated between 11 and 17 percent for houses and then they were about 20 percent for units and townhouses, although all-inclusive, the average growth spread out in all circumstances, like take every place, every kind of property, put it all together then the average was only about 3%, that it grew the overall market as a whole, taking into account the positives and negatives, and that was not huge Overseas buyers contributing to some gains here and there, as their numbers have actually increased since COVID to higher than 2018 levels. Nearly 10% of the new properties in Australia sell to overseas buyers and just shy of 5% of existing properties are selling to international overseas buyers as well.

Speaker 1:

We've had a few millionaires as well migrate to Australia, and this is an interesting one to talk about, because the definition in this sort of scenario is actually described as people who physically have over 1 million us dollars that's important to know available to spend right at this point in time. So not their assets, nothing that's tied up, just available cash that they can go and spend 1 million us dollars right now if they needed to. Australia is impacted by this. We're actually the second highest country behind the UAE with millionaires migrating. That's a really interesting statistic.

Speaker 1:

When I found that one out, it actually confused me a little bit as to why they would be mostly coming here, but when you look at where they're coming from, like more your ages, then that makes a bit more sense. Chinese, russian, indian or some members of the UK as well actually came, but UAE is leading that well and truly. Once they're here, they hold housing more than average millionaires so I'll elaborate on that in a moment and they hold less housing outside of Australia. So, for example, they hold about 40% of their wealth in property, whereas a global average of what they hold in property for millionaires floats at about 29%, and only 10% have external housing as opposed to the global average of 27%. So they hold 10% more in property than the average percent. So they hold 10 more in property than the average and they also have like 17 less outside of australia than the average millionaire. So that's an interesting one. A big reason for that would be relocation. I dare say you know they actually relocate here. The number one reason for their relocation here is investment. Um, and obviously none of them none of them say that tax is a reason for their migration.

Speaker 1:

Development costs if we move into the overall landscape of property development, cost of building and that kind of thing, development costs are contributing to increased prices at the moment. Based on I think it was a June quarter 2024 NAB survey the main issues reported from developers, because Nab actually survey their developers on what issues they're facing and that kind of thing, and the main issues seem to be around labor availability, construction costs, obtaining a permit, a permit, lack of decent sites, high interest rates, high credit and other issues seem to still be problems, but not as much as labor and construction. They're the main things labor availability and construction costs. The average cost of the little cookie cutter boxes that you stumble across in suburbia nowadays like if you're living in a new suburb and you walk out the front and you see 55 cookie cutter houses pretty much the exact same as yours. The average cost of them is about 550K now, so they were about 375 in 2019. With COVID removed, they grew at about 4% per year in the last 30 years. What that means is that, although they've gone from 375K to 550K in the last five years, essentially if you remove, remove covid from it, as in you take away the last couple of years, they were only growing at about four percent per year over the last 30 years. So it's a really big sudden jump, but stretched out as not as vital, um and vigorous as it seems in terms of rent.

Speaker 1:

There's a bit going on. So vacant dwellings are still continuing to be at virtually the lowest levels since 07, which we all know what happened there. The rate is sitting at a very low 1.3, meaning that roughly on average you'll have, you know, five days a year of vacancy on an investment property, which is pretty simple settle on a property, have an open home the next day or the day after, process some applications and then bang. Due to that, the rent values and the cost has actually gone up about 2.6 times since 2000. And it's actually been steadily outgrowing inflation at about 4.2% per year. So rent increases are sitting about 1.3% higher than inflation year on year, give or take.

Speaker 1:

Another thing contributing to all of this is population growth. I get a bit annoyed by this one, because the media is the media. You guys probably all are well aware of my thoughts on the media. I don't really like to pay attention to it. There's a lot of baiting and catfishing and lying and nonsense and picking particular statistics instead of showing an overall picture of what's going on, and they love gallivanting around saying we've had the biggest year of population growth since 2008. I mean, it's true, but a bit of context will probably help you process that information the way that you should.

Speaker 1:

So we normally float around 375K as in 375,000 people, of growth per year in terms of immigration. In 2020 and 2021, we were actually close to 100 and 150K. So quite a deficit there, like 220K per year give or take. So for us to, in the last year, have 650K people come in, it's not that special. You know we've missed out on half a million people again give or take during COVID. The numbers aren't that special. You know it's more of a catch-up. It's mostly overseas students rushing back in and it will level out. So it's not a consistent, continued thing where we're going to be magically having half a million people come in every single year. And you know we're not having the biggest migration in the world that we've ever had. We're catching up. That is slightly higher again due to covid, but it will level out, so it's not going to be a consistent problem.

Speaker 1:

On that note, if we actually take out all overseas migration, like as in, we just look at population growth and completely disregard migration, we're actually failing as a nation, as a country, the whole purpose of life, right? So the purpose of life is to reproduce and survive. I mean theoretically, we would actually go down in population over the next 20 years due to birth rates versus mortality rates, so we aren't breeding enough at the moment as a nation. In fact, more people are dying than people are being born over the next 20 years, based on our current levels, which is an interesting one to think about. Why is that? What's contributing to that? We'll get there. The replacement fertility. Why is that? What's contributing to that? We'll get there.

Speaker 1:

The replacement fertility rate, as in what it would take to replace the population year on year, has been sitting at about two since the 1970s and we failed to reach it ever since. We're currently sitting at 1.58. This can be due to many things. You've got debt, outlook on life, outlook on where things are heading, growth in terms of business with restrictions, trade, employment, migration. We've seen a big drop off In terms of our fertility rate. It's been massive since probably 2011.

Speaker 1:

I'd like to see the correlation between that and ladies or women, females in professional roles, where their jobs and the corporate ladder make it a bit harder for them to have a family and a career. I think that now that we've got women choosing to go into careers more professional careers I think that that's probably a major factor. So the education could definitely be playing a part in that. The more educated we get, the more we're finding that we're having less children. It's an interesting one. Is it that females are going into roles where they feel they can't necessarily take the time off because they're not going to get granted the progression that they want and so they're delaying having families or they're choosing not to? Or is it something completely different and I'm just imagining things poorly? It would be a combination of that, I dare say. Cost of living, outlook on life. I personally don't want to bring a child into this world today with the way everything's going. Yeah, it's just getting harder, like the cost of housing, you know, up 6.9 year on year since 2000, with all of those events going on.

Speaker 1:

But they're they're all the kind of statistics that we we've kind of looked over and I'll probably do an episode on this as well, talking to Don about this and his specific thoughts and whatnot as well. But there's so much to digest in there. Each statistic there can be elaborated on and explained. I wanted to just come in today, give you guys the stats, let you hear them, look over them, have a think about why. But I do intend on sitting down with Don for next week's episode. I should be in melbourne around then and, yeah, we'll just go through all of these um in a bit more detail in terms of why we think it's happening, what's contributing, and give you guys a bit further outlook, because I know hearing the stats and hearing a very small opinion on them might not be overly helpful. But, um, you can draw your own conclusions. You can get a bit of an understanding from what we've gone through today.

Speaker 1:

Main points property prices, the population I find that super interesting to learn about the population and what's actually going on there. The rents as well are fairly important to note on. I feel like I should also elaborate. I don't think I actually explained what the replacement fertility rate is like. I said it's 1.58 at the moment, but I didn't really elaborate on what that means, as in that, that's what we're doing at the moment. We're doing 1.58, but we need about 2.1. What it is is basically the rate at which a population will replace itself exactly without growth, without loss, from one generation to the next, excluding migration. So you need to have about 2.1 children per woman in order to do that um, but we're sitting at about 1.58.

Speaker 1:

Oh, that, that's all for today. I think that next week we'll do a bit more in depth bit of a discussion around it and let you guys, uh, learn a bit more and hopefully help you out, help you make decisions, draw conclusions. But until then, I'll catch you next time. Depth a bit of a discussion around it and let you guys learn a bit more and hopefully help you out, help you make decisions, draw conclusions. But until then, I'll catch you next time. We hope you enjoyed the episode. As always. You know exactly what to do.

Speaker 2:

Hit that follow button, subscribe whatever platform you listen to this podcast on. Also share it to friends, family, co-workers, whoever you think may benefit from it. But unfortunately it's the end and we'll see you next week.

People on this episode

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Oscar Don

Co-host
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Zeke Guenthroth

Co-host