This month in our market update:
• Bring on the population debate
• Redbank and Ipswich win lottery with $5B defence contract awarded
• South East Queensland, Melbourne, Sydney, Perth Adelaide get 85% growth
• Banks wanting interest only loans again, go figure?
Bring on the population debate. The ABC’s Four Corners program rang the bell on the record population growth and the inherent issues we face going forward. It was music to my ears and for you as Custodians should enthuse you to buy as much land as you possibly can.
Let me try and spell things out from my perspective.
This year we will hit 25 million people. When I first wrote the book 7 Steps in 1998 the forecast by the Australian Bureau of Statistics was that our population would peak at 26.3 million in 2050 and stay relatively flat. I knew that was wrong by a country mile, and so did lots of others in the property business. So we just assumed it was a story circulated in Canberra as the debate is a hot potato and no win for politicians.
In 2006 as the mining boom took hold the ABS adjusted their 2050 estimate to 33.4 million and then just 2 years later they cranked that up to 39.6 million. Now they’re saying ‘well it might hit 41.9 million by 2050’. In 7 years our population forecast increased 8.5 million!
What we know for sure is that the ABS have a history of low balling the numbers and ironically that’s good for us. It’s good because the infrastructure is so far behind and the government is running out of money. The government is running out of money because (the baby boomers) around 700 people are turning 65 each day and 80% are lining up for the pension. The pension was cut again last year so that it’s now just $23,600 per person per annum which is $1,400 above the poverty line. In 2017 welfare cost us $160 billion. By 2020 it will cost $190 billion. It’s a train wreck.
Australians need to make a choice. Populate or Poverty. If they want the pension and healthcare benefits we need migration. We need workers. Currently, around 63% of our population growth is from migration. It needs to increase over the next 10 years which is the forecast from the ABS. Also, I think for our children we need to recognize that the world’s population is accelerating toward 10 billion by 2050. Australia has 5% of all the worlds land mass and the outside world may expect us to accommodate at least 1% of the world’s population. I think that’s where we will be by 2100.
Our infrastructure is a nightmare mainly because of poor population growth forecasting and lack of density. Density is the answer to affordability. I believe any property within 2-5 Km of a railway station should be designated high density and no off street car parking.
So best we buy more land.
The population is going to 4 main areas; Sydney, Melbourne, Southeast Queensland, and Perth. I actually think Perth is overstated and the spill will go to Adelaide particularly as health care and education factor high on jobs. Over 70% of all the population growth will go to these main 5 cities and that’s where the jobs are also going.
Interested only in interest-only loans
If you tried getting an interest-only loan late last year it was like pulling teeth and let me tell you that’s rare. However, since March 1st banks have realized they were too hard on investors and interest-only loans and their books had depleted to a stage now where not only have they put them back on the menu but have reduced rates as well!
I’m not even going to try to explain how it all works as it’s highly convoluted involving APRA, RBA and maybe even the banking commission but overriding it all seems to be bank profits. Gotta love that. See more in full blog
More to the point, you should get your loan approved now while you can.
A $5b defence contract was awarded to a company based in Redbank and will certainly be a shot in the arm for land owners there as it follows on from the extension of School Road connecting to Springfield.
Our average client paid just $297 per m2 for their land and now land sale prices average $481 per m2 and I predict with the infrastructure spend commitment land prices per m2 will shoot above $750 m2 to maybe as high as $1,000 per m2 in this cycle.