Speaker 1: Hello, and welcome to the Australian's Money Puzzled podcast. I'm
Speaker 1: James Kirby, the Wealth editor at the Australian. Welcome aboard everybody,
Speaker 1: and my guest today is a demographer. He's a data
Speaker 1: and the major He's a key influencer on trends and
Speaker 1: patterns that shape Australia basically and for our purposes today,
Speaker 1: on the Australian investment market property market in particular. He
Speaker 1: often writes for The Australian. You might have guessed by
Speaker 1: now I'm talking to Simon kusten Macher of the Demographics Group.
Speaker 1: How are you, Simon, I'm very good, Thanks, Nding Neil,
Speaker 1: delighted to have you on. Is a demographer still more
Speaker 1: or less fair description of you?
Speaker 2: I think so. Yeah. So we very much do nothing
Speaker 2: in our little company then to look at big fat
Speaker 2: data sets all day long and trying to figure out
Speaker 2: how the world works, trying to understand how Australia works.
Speaker 2: And we always start with the big picture demographic data sets,
Speaker 2: and then we feed in lots of be this economic data,
Speaker 2: be this sociological and even psychological data. That's just what
Speaker 2: we all use in order to then tell a story
Speaker 2: about how Australia might look into the future.
Speaker 1: Right, okay, so what for us? And to take it
Speaker 1: that the audience are investors and interested anyway in what
Speaker 1: the shape the future shape of Australia. Were particularly interested
Speaker 1: in it as to how it will determine how things
Speaker 1: will go for investors, for instance, for property investors, for example,
Speaker 1: what to you? Most of us are going to know
Speaker 1: the basics, right, We're going to know that Australia is aging.
Speaker 1: We're gonna know that immigration is a sort of tap
Speaker 1: that we can turn on and off, thankfully, and can
Speaker 1: manage the economy to a great extent by being able
Speaker 1: to do that. Not every country can do that in
Speaker 1: such a sophisticated way as Australia. It also has some
Speaker 1: big trends. I suppose work from home has come in
Speaker 1: and seems to be becoming a really deep trend. For
Speaker 1: what to you is the outstanding demographic trend and Australian
Speaker 1: property investors should know.
Speaker 2: There are quite a few. I'd start with the most
Speaker 2: obvious and basic one, and that is the aging of
Speaker 2: the population. Everyone read this a million times beforehand. It's
Speaker 2: no surprise to anyone, but the extent of the aging
Speaker 2: of our society surprises people, and I always point people
Speaker 2: to the important year of eighty five. Eighty five is
Speaker 2: the exact half of us make it to eighty five.
Speaker 2: Half of us won't make it to eighty five. That's
Speaker 2: the median age of death at the moment, and of
Speaker 2: the core that make it past eighty five, half of
Speaker 2: them need care on a daily basis. And we are
Speaker 2: going to double the population eighty five plus in Australia
Speaker 2: in the next fourteen years from five hundred and eighty
Speaker 2: thousand people today to one point two million people in
Speaker 2: fourteen years. That is very soon, and that is one
Speaker 2: hundred percent going to happen.
Speaker 1: One in ten people will be over eighty five.
Speaker 2: One point two million people exactly. We're a bit more,
Speaker 2: we'll grow by then, but something like eight percent or something.
Speaker 2: It's a big number. And we then know already that
Speaker 2: there is no chance in hell that we will have
Speaker 2: even remotely enough aged care workers to look after the
Speaker 2: aging population. Is utterly impossible. Even if we increase migration
Speaker 2: as significantly, we cannot have enough age care workers in
Speaker 2: the system. So that of course tells me that there
Speaker 2: will be massive demand for family care that, of course
Speaker 2: then means we need larger homes. If you cannot put
Speaker 2: Mom into an aged care home, she will be somewhere,
Speaker 2: and usually ideally in many cases at the very least,
Speaker 2: you'll have the family unit step up. That of course
Speaker 2: has the challenge how where do you put her? Because
Speaker 2: spare bedrooms are so forbiddingly expensive that few families can
Speaker 2: actually pull this off. So we are seeing an absolute
Speaker 2: age care crisis coming at us. If we put the
Speaker 2: you know, the human concerns aside, and we put this
Speaker 2: looked purely through the investment lens, here, aged care will
Speaker 2: be an insane investment. It will be an extremely high
Speaker 2: demand and those players that operate, they will be very expensive.
Speaker 2: Because shortage demands the prices go up. So that's a
Speaker 2: short win.
Speaker 1: In the early stages of this demographic shift, it hasn't
Speaker 1: been a great investment. In fact, it's been an area
Speaker 1: where investors have lost money on all the listed age
Speaker 1: care groups have been, as a general observation, very disappointing
Speaker 1: for investors. And so do you think that would ever change?
Speaker 2: I would argue that there will be a flight to quality,
Speaker 2: so you will see more up and coming age care venues,
Speaker 2: and of course they are now operating a completely different market.
Speaker 2: Back in the day you operated quite often with relatively
Speaker 2: poor people, poor customers. We have very soon we have
Speaker 2: the baby boomers moving into aged care for facilities. The
Speaker 2: oldest baby Woma is seventy nine. They will very soon
Speaker 2: be in that stage of the life cycle. And so
Speaker 2: this is a more cash down, a richer generation that
Speaker 2: of course will completely reinvent this.
Speaker 1: Yeah, okay, what about the bigger houses then, is that
Speaker 1: is what you're saying partially explaining the how investors and
Speaker 1: builders and homeowners continue to want larger accommodation And can
Speaker 1: you just remind us by per capita per square meter,
Speaker 1: what's the story in Australia. Are we moving to bigger
Speaker 1: accommodation or is that an illusion of my illusion?
Speaker 2: So over overall our houses are getting bigger and our
Speaker 2: lot of our lots of lands are getting smaller. The
Speaker 2: story is pretty simple. Land is outrageously expensive, and we
Speaker 2: want to live somewhere, and so we've got in order
Speaker 2: to make housing cheaper. The easiest way to make housing
Speaker 2: cheaper is to minimize the land size that you occupy.
Speaker 2: And so we've been seeing this all the while, well,
Speaker 2: the personal preferences of families very much change. You do
Speaker 2: not put two kids into a bedroom. There's a clear
Speaker 2: formula that Australians have one bedroom for mom and dad,
Speaker 2: one bedroom for each kid, and then a spare bedroom,
Speaker 2: you know, an office if you are knowledge workers that
Speaker 2: work from home. So a family with two kids needs
Speaker 2: four bedrooms. That is a lot. Right now and for
Speaker 2: the next thirteen years. We have the biggest generation of
Speaker 2: them all the millennials, making babies, starting their families. That
Speaker 2: means they move out of their inner city hipster apartments
Speaker 2: in your Fitzroy's, your Surrey Hills, your four de two valleys,
Speaker 2: and they are looking for family sized homes.
Speaker 1: Do you assume they will look for homes at least
Speaker 1: as large as they came from.
Speaker 2: So that's the ideal. So if there's housing preference research
Speaker 2: that asks people, yeah, you know what, of course, you
Speaker 2: all deal with financial constraints. Doesn't matter how rich you are.
Speaker 2: There a certain financial constraints that you're operating with. What
Speaker 2: are the things that you're willing to compromise on at
Speaker 2: which other things you're not willing to compromise on the
Speaker 2: number of bedrooms is the most important thing for people.
Speaker 2: They're willing to compromise on the quality of the build,
Speaker 2: on the location of this type of the dwelling. But
Speaker 2: the number of bedrooms are the most important bit, is
Speaker 2: that right?
Speaker 1: Yeah, And so there's no innovations going on there in
Speaker 1: the way of smaller bedrooms.
Speaker 2: Of course we are shrinking the bedrooms. That very much
Speaker 2: is happening as well, because you say, ah, the kids
Speaker 2: deserve privacy whatever it is that the study doesn't need
Speaker 2: to be all that big to be honest, the master
Speaker 2: bedroom needs to be big enough, a big bed. But
Speaker 2: that we have been shrinking those swellings and quite often
Speaker 2: people say that's stupid, we're jeopardizing the quality of life here.
Speaker 2: But the reason our land gets so expensive is of
Speaker 2: course a bit silly considering how big we are as
Speaker 2: a country.
Speaker 1: It just makes me think. It leads me to a
Speaker 1: larger point which I wanted to bring up with you.
Speaker 1: I really want to know where you're coming from on
Speaker 1: this selling back from it, we were thought that if
Speaker 1: there's an aging of Australia, that many of that age
Speaker 1: cohort might like to lead the larger cities to somewhere
Speaker 1: more pleasant, are more relaxed, and we also had a
Speaker 1: big shift in COVID to the treat change sea change.
Speaker 1: Standing back from it, is that happening in any serious
Speaker 1: way demographically.
Speaker 2: Yes, quite a few of those pandemic trends are persisting
Speaker 2: to a smaller degree, so they're working from home phenomenon.
Speaker 2: We quite quickly realized that the people that work fully
Speaker 2: remotely fully from home is actually relatively small. Most people
Speaker 2: work in a hybrid way. Doesn't matter whether you go
Speaker 2: to the office one day per week or five days
Speaker 2: per week, as long as you go to the office.
Speaker 2: Sometimes you stay within a magical two hour drive time
Speaker 2: radius of the CBD. So you can draw this two
Speaker 2: hour drive time radius around all CBDs in the country,
Speaker 2: and its population boom inside and its crickets outside of
Speaker 2: that two hour drive time radius. It's nice and quiet there.
Speaker 2: And of course the retirees that they always were a
Speaker 2: collde that could move wherever they wanted because they were
Speaker 2: not shackled by their place of work anymore. And so
Speaker 2: the downsizer narrative that some people expected with the baby
Speaker 2: boomers to occur is much smaller than it actually was expected,
Speaker 2: simply because baby boomers are not at scale doing the
Speaker 2: gold watch retirement, where it's the gold watch on the
Speaker 2: Friday and then it's golf course until you drop. That's
Speaker 2: not what they do. They increasingly slide into retirement. They
Speaker 2: reduce their working hours three days per week, two days
Speaker 2: per week, a bit of consulting here and there. Maybe
Speaker 2: you take a really long break in the middle of
Speaker 2: the year, got on a Rhine River cruise or something
Speaker 2: like this, And ultimately that means that you are shackled
Speaker 2: to the CBD for longer, because why would you give
Speaker 2: up your large scale family home that is in comfortable
Speaker 2: commuting distance to move elsewhere to retirement destination.
Speaker 1: So has downsizing not matched forecasts of downsizing.
Speaker 2: It's much exaggerated. The whole downsizing narrative, of course does happen,
Speaker 2: and people do move to Noosa, that's true, but ultimately
Speaker 2: we are staying put. And if you talk to Australians,
Speaker 2: older Australians, they'll tell you things like I want to
Speaker 2: be carried out of the family home. That seems to
Speaker 2: be the ultimate god in life. Unfortunately, while most people
Speaker 2: say they want to do this, only fourteen percent of
Speaker 2: us die in the family home. Will ultimately still die
Speaker 2: in hospitals or hospitals.
Speaker 1: What about downsizing within the neighborhood, within the zone.
Speaker 2: That's of course not possible because the baby womans that
Speaker 2: are living in big family homes, if they want to
Speaker 2: downsize locally, there are no comfortable to bedroom apartments or
Speaker 2: smaller dwelling availables because these are dominated by those family
Speaker 2: homes and they did not add any stock over the
Speaker 2: last decades. Because the bastions of the baby woman family
Speaker 2: homes are also the nimbi bastions that they've blocked development
Speaker 2: because they wanted to retain the built environment, the atmosphere
Speaker 2: of the area they lived in, and now they cannot downsize.
Speaker 1: It would suggest to me maybe I'm wrong. Tell me
Speaker 1: what you think downsize or type accommodation in any suburb
Speaker 1: will be highly valued in the near future because there's
Speaker 1: such little supply of it.
Speaker 2: Exactly, and to be perfectly blunt to be operating in
Speaker 2: a property market where there is a shortage of all
Speaker 2: types of housing in all locations. Not to be too
Speaker 2: flippant about it, but whatever you build will have will
Speaker 2: find a buyer.
Speaker 1: Sure people will buy or rent tenanting. What do you
Speaker 1: think in the nature of property formation. What type of
Speaker 1: property do you think will be the most in demand
Speaker 1: in the near future.
Speaker 2: In the near future, family sized homes for millennials. Millennials
Speaker 2: cannot put the families that they're making into the dwellings
Speaker 2: they're currently in. That's impossible. So we know that over
Speaker 2: the next thirteen years or so, the biggest generation of
Speaker 2: them all moves from the inner suburbs of our big
Speaker 2: cities to wherever they can find a three and four
Speaker 2: bedroom dwelling. Of course, if you talk to the planners,
Speaker 2: they say, yo, we want heaps more three and four
Speaker 2: bedroom dwellings in the middle suburbs. We need to densify
Speaker 2: our cities. Our cities are much too sprot out. Absolutely correct,
Speaker 2: they are, and they should have been built differently. But
Speaker 2: the cheapest way of building housing in the here and
Speaker 2: now is to build us a bit of land on
Speaker 2: a greenfield side and put a cheap box on top.
Speaker 2: It is much much more expensive on a square meter
Speaker 2: basis to build medium density or high density. And if
Speaker 2: you operate a city like Melbourne that grows at one
Speaker 2: hundred thousand people per year, you need housing fast. And Melbourne,
Speaker 2: of course has no physical boundaries around it. You can
Speaker 2: just pancake the city out and out and do you
Speaker 2: then build infrastructure problems for the future and whatever. You
Speaker 2: build an absolutely unmanageable, terrible city. But that's neither here
Speaker 2: nor there in the show term. So that's one of
Speaker 2: the big conundrums that we have.
Speaker 1: Just keeping it on national picture, you mentioned that millennials
Speaker 1: were the biggest.
Speaker 2: What do you mean so millennials are the biggest generation.
Speaker 2: They're not the biggest birth code. We always talk about
Speaker 2: the baby boomost being the biggest birth code because we
Speaker 2: had three point eight kids per families, that these are
Speaker 2: big families. But millennials saw the benefit of the last
Speaker 2: two decades of being empt up by migration. So they
Speaker 2: are much more multicultural generation, if you will, as baby wooms,
Speaker 2: and so they're much bigger in numbers and now they
Speaker 2: are all on.
Speaker 1: They are the dominant cohort in Australia absolutely as we speak.
Speaker 1: And just remind your listeners what a millennial is.
Speaker 2: Millennials are people born in the eighties and nineties. So
Speaker 2: these are people. The oldest millennials in the early forties.
Speaker 2: The youngest one is in their mid twenties.
Speaker 1: So it seems to be there's two huge trends. There's
Speaker 1: the aging of Australia and this is the doubling up
Speaker 1: the over eighty fives, and then there is the millennial
Speaker 1: to simplify, moving from their inner city barista neighborhood to
Speaker 1: the middle suburbs. They hope to find a family home.
Speaker 1: They hope, which would suggest to me that the standalone
Speaker 1: family home is it's been highly prized and its valuations
Speaker 1: have risen faster than units for a long time, and
Speaker 1: it was suggest to me that's going to keep going
Speaker 1: if that is the demographic undercurrent.
Speaker 2: Absolutely, just to be fair, millennials or need three and
Speaker 2: four bedrooms very soon. Are we building them fast enough? No,
Speaker 2: so they will go up further in price. All the
Speaker 2: while we're not seeing the benefits of actually baby boomers
Speaker 2: in the next ten years vacating they are three in
Speaker 2: four bedroom dwellings because they are not downsizing. They're hanging
Speaker 2: on in the workforce for longer. They don't see the
Speaker 2: point in selling the family home just yet because it
Speaker 2: massively increases in value, and if you sell, you have
Speaker 2: to do the whole stupid stamp to these stuff and whatever.
Speaker 2: It's a nuisance and you don't have the ideal downsizer
Speaker 2: unit nearby. What makes sense to downside for you, so
Speaker 2: they will stay. So the demand four, three and four
Speaker 2: bedroom goes through the roof. It's absolutely gigantic, But there's
Speaker 2: also a bit of a to be honest. So the
Speaker 2: millennials that need family homes now in the next ten years,
Speaker 2: I don't have any positive news for them. If I'm
Speaker 2: talking to people that are twenty that only need their
Speaker 2: family sized homes in fifteen years time or so, I'm
Speaker 2: a bit more optimistic about them for them because by
Speaker 2: then you'll have all the baby boomers die out of
Speaker 2: their homes and so you'll see that massive search of
Speaker 2: supply in the market. So that should then soften house prices.
Speaker 2: Whether this is a slowdown of growth, whether this is
Speaker 2: actually price reduction, who knows. But it'll be easier for
Speaker 2: people that are twenty than it is now for people
Speaker 2: that are thirty.
Speaker 1: Interesting, all right, we'll take a short break. We'll be
Speaker 1: back in a moment. Hello, Welcome back to The Australian's
Speaker 1: Money Puzzle podcast. I'm James Kirby and I'm talking to
Speaker 1: Simon kusten Marker of the Demographics Group, who is a
Speaker 1: demographer and well known demographer and read for The Australian
Speaker 1: and is a well known of course generally in media
Speaker 1: as a spokesman or a commentator on trends in population,
Speaker 1: which I always find very interesting as it informs trends
Speaker 1: in property. Now, in the first segment we did talk
Speaker 1: about two big trends the aging of Australia. The population
Speaker 1: over eighty five is going to double. There's lots of
Speaker 1: ways you can look at that and be aware of
Speaker 1: that in how you invest. Similarly, Simon was mentioning how
Speaker 1: the millennial, the largest cohort of all born in the
Speaker 1: eighties and nineties, currently in their inner city pads. Once
Speaker 1: they have kids, they've got to go out to the
Speaker 1: middle suburbs unless they want to be falling over each
Speaker 1: other inside in their small house. So they do, and
Speaker 1: he's laying it out that will be very competitive in
Speaker 1: the near future. So there are two major trends. We
Speaker 1: didn't really zone in on work from home Simon. I mean,
Speaker 1: it's a trend that's emerged in our lifetime in a
Speaker 1: serious manner. People always did it. I mean, just to
Speaker 1: reflect on that, do you think the COVID period changed
Speaker 1: work from home in any structural fashion, and how might
Speaker 1: that affect property in the going forward.
Speaker 2: Working from home is here to stay. Once you give
Speaker 2: people a right, it's very hard to take it away.
Speaker 2: You can see this in the US with gun rights.
Speaker 2: Once you give people a certain right, taking this away
Speaker 2: is very tough. So people will want to work from home.
Speaker 2: Of course, you see this in New South Wales where
Speaker 2: a government tries to force the government employees back. We'll
Speaker 2: see how this plays out. I think it's very unfavorable
Speaker 2: and I think that for the next well, for seeble future,
Speaker 2: it is workers who hold the leverage. Workers can make
Speaker 2: the courts simply because we are running out of workers.
Speaker 2: That is another very important demographic druism in the coming decade.
Speaker 2: There's a skilled shortage right now. The skilled shortage is
Speaker 2: not really linked to the pandemic. Yes, the pandemic made
Speaker 2: it worse because we said, hey, in no financial support
Speaker 2: for temporary visa holders, so they bucked off. That created
Speaker 2: a dip of three hundred thousand people in a workforce
Speaker 2: of fourteen million. That had an impact, But the skilled
Speaker 2: shortage will still be here in the next ten years
Speaker 2: because what we are seeing is the big court of
Speaker 2: baby boomers leaving the world of work. They of course
Speaker 2: allowed to retire. It's fine, they worked hard. But at
Speaker 2: the other end of the spectrum we have a slightly
Speaker 2: smaller cord entering the world of work. As if this
Speaker 2: imbalance wasn't bad enough, for the next thirteen years, we
Speaker 2: have millennials making babies. That means they go on parental
Speaker 2: leave at least for a little bit, and so they
Speaker 2: temporarily leave the world of work.
Speaker 1: This didn't immigration traditionally plug those problems.
Speaker 2: It could plug those problems because in the past we
Speaker 2: had relatively small cords retiring year after year. Now we
Speaker 2: have this impact of this gigantic baby boomer cord leaving. Yes,
Speaker 2: and this is why we I'm absolutely convinced that we
Speaker 2: will continue a high migration approach in this country, which
Speaker 2: of course sometimes people criticize for saying, hey, right now
Speaker 2: we have a housing shortage, and why are we still
Speaker 2: taking in migrants. Maybe we should put the brakes on
Speaker 2: for now for a bit, But ultimately, as slowing migration
Speaker 2: creates more problems than it solves, and quite often I
Speaker 2: think it's just a cheap political way of saying we
Speaker 2: tackle the housing affordable issue by saying we slow our
Speaker 2: migration because it's very convenient, isn't politically you say housing
Speaker 2: affordability is the fault of a non voting court. Easy,
Speaker 2: And of course you're saying that I ticked my speaking
Speaker 2: point about housing affordability. I don't need to talk about
Speaker 2: as a government in all the ways that I'm complicit
Speaker 2: in driving up house prices. Because you could get rid
Speaker 2: of stamp duty, you could get rid of Franklin credits,
Speaker 2: negative gearing, and you could first home bio grants. They
Speaker 2: only drive up house prices. There are plenty of policies
Speaker 2: there that drive house prices up. But if you were
Speaker 2: tackling them, if you were dumb enough to tackle them,
Speaker 2: like Bill Shorten Boss, you're guaranteed to not be voted
Speaker 2: in because you still operate the country where the majority
Speaker 2: two thirds of all voters own their home and they
Speaker 2: don't want to down.
Speaker 1: But back to the work from home and the difference
Speaker 1: it might have made if it did make a difference
Speaker 1: to property investing, what's your initions reaction there?
Speaker 2: So what it does is traditionally people wanted to avoid
Speaker 2: the solstry and commute, and so they moved as close
Speaker 2: to the CVD as they could afford. Now that working
Speaker 2: from home is a thing, and you know, yeah, you
Speaker 2: only need to go to the office every now and
Speaker 2: then we widened our perimeters. So all of a sudden,
Speaker 2: and this is where we'd look at this two hour
Speaker 2: drivetime radius from the CBD. All of a sudden, a
Speaker 2: wider area is considered acceptable. You're willing to commute longer.
Speaker 2: If you're only going to the office one or two
Speaker 2: days a week, then the hour and a half commute
Speaker 2: each way or whatever is fine, Whereas in the past
Speaker 2: this would have been ridiculous.
Speaker 1: It would have been hell because you were doing it
Speaker 1: five days. But you can do it two days. And
Speaker 1: do you see in the numbers any reflection of that
Speaker 1: kicking in, for instance, city zones becoming more popular or
Speaker 1: more expensive that perhaps could be explained in some way
Speaker 1: by that trend.
Speaker 2: Yeah, we see the fastest growing areas in all capital
Speaker 2: cities is the urban fringe. That's because this is where
Speaker 2: you build greenfield development sites, so you can build relatively
Speaker 2: cheap housing at scale fast you build the through four
Speaker 2: bedroom stock that those millennials want, and you are just
Speaker 2: in the commutable distance.
Speaker 1: When you say fastest growing you mean building growth.
Speaker 2: Meaning population growth. I measure everything in population growth. But yeah,
Speaker 2: this is where the if you look at the big cities,
Speaker 2: they see growth everywhere right now, but it's the fringe.
Speaker 2: It's like a belt around the old fringe. That is
Speaker 2: absolute boom town.
Speaker 1: Have you seen any zones where there was price appreciation
Speaker 1: because of work from home trends?
Speaker 2: No, not really, because you would say, in a sense
Speaker 2: the inner suburbs would have seen a weakening theoretically in
Speaker 2: an environment where we didn't also see massive population growth.
Speaker 2: And so because you have growth wherever you look, essentially
Speaker 2: in the big cities, prices don't fall. And then, of
Speaker 2: course prices didn't fall during the pandemic because we had
Speaker 2: even though we had negative population growth, people left the country.
Speaker 2: We had super low interest rates, and if interest rates
Speaker 2: are super low, people are happy to bid, you know,
Speaker 2: a lot of money for their houses, and so that
Speaker 2: drove up prices. And now we have this crazy shortage
Speaker 2: and interest rates are going up and up, and we
Speaker 2: still see high prices that don't really see them fall.
Speaker 1: Structurally speaking, one of the things I want to ask you,
Speaker 1: which is an economic question, I'm sure you're across it.
Speaker 1: Was this notion very strong concept. I think that what
Speaker 1: happened we had this extraordinary period or interest rates went
Speaker 1: to zero and they fell from whatever in long term
Speaker 1: average seven percent to zero for some years. And in
Speaker 1: that time being roughly have the five years, six maybe
Speaker 1: seven years running up to about two a year and
Speaker 1: a half ago, two years ago. What occurred in the
Speaker 1: property market was a capitalization of interest rate changes as
Speaker 1: reflected on what you're saying that basically people could bid
Speaker 1: more because the loans were cheaper than they ever have
Speaker 1: been before. That period is now over, So I'm asking
Speaker 1: you do you think we will Do you think it's possible?
Speaker 1: People say it. Property is very expensive, Yes, it is
Speaker 1: on a historical and international measure. Do you think we
Speaker 1: could have a piece in the next decade of the
Speaker 1: sort of price appreciation we had in the last decade
Speaker 1: that included that period of capitalization of interest Yeah.
Speaker 2: The way that I look at interest rates is, you know,
Speaker 2: it would be, of course fun to have lower interest
Speaker 2: rates again, but I don't see that happening because the
Speaker 2: RBA is fighting an uphill battle against demographics. The RBA
Speaker 2: wants us to spend less money. That's why they put
Speaker 2: up the interest rates because high interest rates are deflationary.
Speaker 2: But what we're seeing in the next decade is that
Speaker 2: we see the biggest generation ever, the millennials, moving through
Speaker 2: the highest spending phase of the life cycle. They completely
Speaker 2: move through the mid forties. That's the phase of the
Speaker 2: life cycle we spent more money than ever before or
Speaker 2: ever after because you already had quite a couple of promotions,
Speaker 2: so you have a lot of money to spend. You
Speaker 2: have you already had all the kids that you will
Speaker 2: ever have, so you have a lot of costs associated
Speaker 2: with those kids. You have a big fed movie.
Speaker 1: You can't save every penny.
Speaker 2: That you earn, no matter the scenario, goes out the
Speaker 2: door back into the economy, really accepting the forty year,
Speaker 2: and so the millennials will spend no matter what guarantee.
Speaker 2: The biggest generation also the richest generation, the Baby boomers.
Speaker 2: They are now moving into retirement and traditionally they would
Speaker 2: have been meant to become a poor penny pinching pensioner cohort,
Speaker 2: but they're not because they benefit from high house prices.
Speaker 2: They all own their own homes, so they feel richer
Speaker 2: on paper the wealth effect, plus they own the vast
Speaker 2: majority of cash savings. They benefit from high interest rates.
Speaker 2: Why would the richest core would stop spending money. So
Speaker 2: for the next decade we have this weird set up
Speaker 2: where the richest cord and the biggest court definitely want
Speaker 2: to spend money. And so what do you do as
Speaker 2: an RBA. You can't just stay Yeah, we'll easily cut
Speaker 2: rates as long as everyone is spending like crazy, So
Speaker 2: keep the rates elevated as as a lower degree is.
Speaker 2: But we will spend money like crazy, and so you
Speaker 2: create the suffering at the bottom end of society.
Speaker 1: It requires a consistent elevation of interest rates.
Speaker 2: Is that what you Yeah, I'm saying. Structurally speaking, I
Speaker 2: would say the indust rates want to be higher in
Speaker 2: the next in this decade then they were in the
Speaker 2: past decade.
Speaker 1: Okay, food for thought, folks. Very interesting, and you might
Speaker 1: just in terms of context in terms of what timon
Speaker 1: the saying. Also keep in mind that the savings that
Speaker 1: were built up during the pandemic have been effectively drained
Speaker 1: with the exception of mortgage money. It's been quite obvious
Speaker 1: and has been I mean the savings race first of all,
Speaker 1: but from a long term average of six percent back
Speaker 1: to about one percent now and the savings buffer that
Speaker 1: was built up during COVID, as you will be aware,
Speaker 1: has been almost entirely drained from the system and people
Speaker 1: use that just basically for ongoing living expenses. It was
Speaker 1: one of the things that cushioned people in the last year,
Speaker 1: so it won't be cushioning them next year. Okay, shortbreak
Speaker 1: back in a moment, Hello and welcome back to The
Speaker 1: Australian's Money Positive podcast, Standing Away or stepping away from
Speaker 1: daily news and weekly topics this week and looking at
Speaker 1: the big picture with Simon Kussen Marcher of the Demographics Group.
Speaker 1: He's a demographer and very much across the big trends
Speaker 1: in Australia. We've been talking about the big trends in society.
Speaker 1: I wanted to just zone in at the end of
Speaker 1: the show Simon on place and region. In very broad terms.
Speaker 1: Queensland seems to be in many ways the state of
Speaker 1: the future. From a property perspective, was consistently strong in
Speaker 1: recent years. I had a long, dull period. Admittedly, until
Speaker 1: maybe three years ago it was pretty flat. Brisbane prices
Speaker 1: had a long history of trouble. The city was overbuilt.
Speaker 1: Then it had floods, then there was COVID et cetera.
Speaker 1: But it's been steaming along since that time, and more broadly,
Speaker 1: internal migration continues in that direction, from New South Wales
Speaker 1: and from Melbourne. How important is that and what do
Speaker 1: you think of that? I would say consensus but very
Speaker 1: commonly held opinion that Queensland is where the property action
Speaker 1: might really centralize in the future, Sydney being sort of
Speaker 1: in some extent full to the gills and Melbourne being
Speaker 1: able to be overbuilt it needs be.
Speaker 2: Yeah, so I'm very optimistic about Southeast Queensland, and I,
Speaker 2: of course, as a demographer, look at Southeast Queensland as
Speaker 2: a single city, as a single conurbation. The local mayors,
Speaker 2: the tom Taates of the world would of course hate this,
Speaker 2: but if you view at south Southeast Queensland as a
Speaker 2: single city, you realize how powerful this can be. It
Speaker 2: is the best connected of the three big capital cities.
Speaker 2: Then because you have a string of pearls of three
Speaker 2: international airports across the Eastern seaboard, you have three CBDs.
Speaker 2: You could even extend it to Woomba with a with
Speaker 2: a big regional airport. So the most important challenge that
Speaker 2: this region has is to improve the connectivity between its
Speaker 2: hubs and this is what actually the Olympic Games was
Speaker 2: meant to push. It was meant to do. This was
Speaker 2: meant to do an Olympics on the cheap and use
Speaker 2: all the money to build infrastructure, so that of course
Speaker 2: drives the region. Additionally, so you have the fighting chance
Speaker 2: to get Olympic infrastructure money into a city to a
Speaker 2: degree that neither Melbourne nor Sydney have, so that works
Speaker 2: in their favor. The only problem is that we now realized,
Speaker 2: oh lord, we have no workers. If we take all
Speaker 2: the workers to build our infrastructure, they are not building residential.
Speaker 2: That hurts the market there. And of course all nine
Speaker 2: we realized that infrastructure is inflationary, so we can't build
Speaker 2: too much because we don't want to add to the
Speaker 2: inflationary pressures. That said, though, ultimately they will build more
Speaker 2: infrastructure in Melbourne or Sydney in the coming decade. That
Speaker 2: will push them up. And of course you will have
Speaker 2: retirees continuing to move to Queensland. We have now a
Speaker 2: big cod of retirees ahead, so this will come drive
Speaker 2: the economy as well. And of course each of those
Speaker 2: big cities Sunshin Coast, Gold cost Brisbane now have a
Speaker 2: CBD very much in their own right, so they then
Speaker 2: create jobs and then attract populations. The problem now is
Speaker 2: that Brisbane is of course becoming more and more expensive
Speaker 2: and so you're still in competition the big cities with
Speaker 2: each other, so that slows growth a bit down. But
Speaker 2: then you look at the Gold Coast. This is a
Speaker 2: region that has it all. It's a retire redestination, it's
Speaker 2: a lifestyle destination, has a CBD in their own right.
Speaker 2: It also acts as an overflow suburb of the people
Speaker 2: that cannot live in Brisbane, so they have it all.
Speaker 2: It's perfect. It's a work from home destination as well.
Speaker 1: It sounds that you have no problem at all with
Speaker 1: the consensus about Queensland being basically having tickets.
Speaker 2: Especially not if you talk about the Gold Coast or
Speaker 2: Sanchion Coast. Very optimistic there. I would say the same
Speaker 2: is to a slightly lesser degree true for Geelong. Geelong
Speaker 2: will be an absolute massive growth machine because it's the
Speaker 2: overflow suburb of Melbourne and increasingly has an industry a
Speaker 2: CBD in their own right. There's nothing holding Geelong back either.
Speaker 2: We then go further, and we look at guaranteed trends
Speaker 2: in the next ten years will be an increasing military spending.
Speaker 2: So who will benefit from more military spending. It's a Darwin,
Speaker 2: it's a town's will, it's an Adelaide. Maybe it can'st
Speaker 2: to a smaller degree, but so you see that these
Speaker 2: big shifts definitely will be mirrored in our urban investments
Speaker 2: as well.
Speaker 1: Very good. Some great new ideas there that we haven't
Speaker 1: come upon on the show before. Many of them we
Speaker 1: often bounce off, but we don't sit down and talk
Speaker 1: about them properly because we haven't had the right present
Speaker 1: to talk to. But we did today. So Simon kustum
Speaker 1: marka thank you very much for being on the show.
Speaker 1: Very interesting. We'll talk to you again. I'm sure it's
Speaker 1: been a delight lovely Thank you, Simon, and folks, keep
Speaker 1: those emails coming if you can the money puzzle at
Speaker 1: the Australian dot com dot AU. One other thing, do
Speaker 1: mention us to someone you know in your circle. It
Speaker 1: would be great to just tell them about the show.
Speaker 1: And today's show was produced by the same ango. Talk
Speaker 1: to you soon. A foot