Look what’s going to happen to Australia’s property markets over the next 40 years

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You’ll never believe what’s going to happen to Australia’s property markets.

Multiple PropertyTo deal with the projected population growth between now and 2061 it’s likely we’re going to require one new property built for every two properties that currently exists!

This is despite the recently released Intergenerational Report (IGR) showing that Australia is going to be smaller, older, and more in debt than previously expected in 40 years’ time.

The previous IGR in 2015 projected an Australian population of almost 40 million by 2054-55.

The 2021 update forecasts 38.8 million by 2060-61, but this still means Australia’s population is projected to grow faster than most other developed countries.

Chart01

Despite the reduction of the projected population, these trends are truly monumental.

If you think about it, it’s taken Australia well over 200 years since European settlement to reach a population of 25.5 million people today.

But in the next 40 years, our population will increase by around 13.3 million people.

In other words, it will increase by over 50%!

To make this worse, currently, there are 2.5 people in each household, but the IGR forecasts the average number of people in each household will shrink a little moving forward, meaning we are going to require about a third more real estate than we currently have.

All this means our way of living is going to change considerably and town planners will struggle to cope with this growth.

Of course, this will impact property investment choices, but strategic, knowledgeable investors will be well-placed to capitalise on the changing trends.

The biggest demographic challenge

Australia’s greatest demographic challenge is likely to be our aging population caused by increasing life expectancy and falling fertility rate.

Chart02

As our population ages, there will be fewer people of working age relative to the number of older Australians.

Chart03

This presents long-term economic and fiscal challenges similar to those faced in most comparable countries.

Chart04

Migration will play an important role in offsetting this demographic challenge by delaying the effect of the aging population as well as providing more tax-paying residents.

However, migration is not a complete solution to the challenges associated with aging given migrants also age, meaning migration needs to be managed well to ensure it continues to support higher living standards.

Who’s going to pay for all these older Australians

Fortunately in Australia we have amongst the longest lifespan of nations around the world, with the average lifespan for females is 86 years of age while males live on average of 82 years but the intergenerational report suggests in 40 years’ time males are likely to live to 90 years of age and females to 92.

With our rising and ageing population, the government is going to have to spend more on healthcare over the next 40 years.

Currently, the government spends about 29% of its budget on healthcare and this will rise to 38% over the next 40 years.

Chart05

It’s not hard to draw the conclusion that as moving forward more Australians will be living longer and requiring either pension or increased health care or both, there won’t be enough people in jobs to support the significant increase in government spending required.

This just means that we will need to import more skilled, tax-paying workers to help support the system while other Australians are likely to need to work till they’re older and those who are not self-funded retirees are going to be sharing a smaller pool of funds.

The bottom line

In this age of snap lockdowns, sometimes thinking 40 hours ahead is a challenge.

Yet the government forecasters are trying to think 40 years ahead and came to the conclusion will be older, smaller, and more in debt than previous Intergenerational Reports suggested.

However, my mind is still the best country in the world and we are living in the best time in history and I look forward to living another 40 years in Australia which will make me 108 at the time.

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'Look what’s going to happen to Australia’s property markets over the next 40 years' have 4 comments

    Avatar for Michael Yardney

    July 25, 2021 Murray McLennan

    Over the last 40 years the Australian population has increased by 74%. An increase of 50% over the next 40 years suggesrs that there will be a significant reduction in growth – and that will be relected in a less dynamic Property Market.

    Reply

      July 25, 2021 Michael Yardney

      Yes you’re right Murray. It is projected population growth will slow considerably from the deady days of the last few decades

      Reply

    Avatar for Michael Yardney

    July 25, 2021 Ben

    I don’t want to be sensationalist, but the average lifespan of buildings is about 40 years after which most are demolished and rebuilt or refurbished and incorporated into a bigger development on the site. Therefore we actually need to completely rebuild 1.33 times what we currently have over the next 40 years. If anything I think we will be underestimating the population and resource pressures on SE Asia and the subsequent migration from SE Asia to Australia.

    Reply


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