MB Radio: Demographic headwinds & property

Demographic light breezes

With the Australian economy past a major workers to dependents demographic tipping point, Leith Van Onselen and Catherine Cashmore spoke with Gunnamatta about the implications this has for Australian Real Estate as well as the risks involved for future Real Estate buyers and those already invested. Β The discussion also considers the role immigration and negative gearing play in maintaining real estate prices and demand, while potential first home buyers increasingly take themselves out of the market and Australian politics refuses to touch the issue.

 

Comments

  1. The most important demographic factor will be the doubling if our deaths. Just as the was a baby boom, letter it becomes a death bust.

  2. This affect all assets, the stocks are supported by super that have to buy the asx no question asked
    Going to be fun when the funds will have to switch to cash or have negative outflow πŸ˜‰
    I ll favor property anytime

    • innocent bystanderMEMBER

      negative outflow
      which is why compulsory super is being increased
      and
      why there will be a big push to stop retirees cashing out their super as lump sums.

      • notsofastMEMBER

        And why there will be a massive push to keep people working past 65 and past 70 and even on to 75. Working even if it is in a part time role and with significantly reduced responsibilities.

    • yes indeed – I can foresee legislation passed before this decade is out that extends the preservation age to 70 plus years, PLUS compulsory allocation of funds (e.g government bonds), anything to keep the funds within the system or meta-systems.

      • notsofastMEMBER

        I see that some of the Superannuation funds will be used to provide long term funding, 10 year plus bonds, to the Australian banks. This will help overcome some of the problems associated with banks lending out long and deposit/borrowing short.

    • Yeah right Dam – property sounds like a real winner.

      Especially when all the deceased estates start flooding onto the market. That will really send prices through the roof.

  3. Thanks to all for this IMHO excellent discussion on perhaps the most serious domestic issue currently at play in the lives of all Australians.
    I’m afraid Australian Banks and politicians will be no different to their counterparts in The USA,Ireland,Spain etc in the past…they don’t want to know.

    • Politicians on both sides, certainly do know, and have since the IGR1.
      27% to just under 50% spend of budget on aged certainly does sound daunting..

      Both Leith and Catherine seem to assume that taxation revenue increases will come only from the workers. We must change the thinking to include the whole of society when looking for those required revenues. We must broaden the base to include over 65’s in the additional revenues.

      We also need to tax the asset rich/cash poor (over 65β€²)

      1. GST to 20% and raise welfare and the tax free threshold accordingly to compensate.
      2. Land tax to replace stamps and create reverse mortgages from Centrelink for those that are asset rich/cash for to pay.
      3. CGT on all property sold under 10 years. Exemptions for real reasons to move – health, babies and work. No CGT after 10 years, ZERO!
      4. Death tax on the value over $1million at 25%
      5. Asset test the PPOR (value over $750k) for pension eligibility and also provide reverse mortgages exclusively from the govt, to those asset rich/cash poor. It is not fair that pensioners can live in a $5million dollar home, have $1m in cash and still get a part pension!

      Catherine, 21.6 million permanent residents and 1.4 million temp visa holders. You may need to ponder again on that ‘high’ population growth idea. Certainly positive growth but more like 1.35% is we count actual permanent resident citizens.

    • notsofastMEMBER

      Why should the Australian Banks worry. They are making and distributing their massive profits while knowing that in the end it will be the Australian Taxpayer picking up the tab.

      The best part about this for the Australian Banks must be the fact that they can still get away with this while everyone who knows anything about banking knows how it is going to end up in the end.

      If you were to tell me ten years ago that something like this was going to happen in the future I would not have believed you. I would have written you off as a conspiracy theorist. It really is quite unbelievable that this is happening.

    • The greater the risks, the greater the opportunities.

      We are a service economy that may be able, helped by a world class NBN, deliver services to the rising 600 million home planet residents. Especially if we are prepared and ready for the service delivery to China, USA and India as they age.

      Just as people buy products now online, so will they buy services on a more flat earth. Products have certainly created the flat earth and layed a good foundation for the delivery of the services…

      • “The greater the risks, the greater the opportunities.”

        it s a sayin that is far from being proven πŸ˜‰

  4. http://seniorjournal.com/NEWS/SeniorStats/2007/7-03-16-OldvsYoungGraph.gif

    The big question is what id KR thinking now. some time ago he answered me with a direct response..

    Re: Demographics

    Postby demografix Β» Thu Nov 22, 2012 2:38 pm
    A FB chat with Mr Rudd…post Q&A

    Paul R Collins – “Mr Rudd, the ageing of Australia is unprecedented in history and our death rates double in the next 25 years, which may mean our natural growth drops close to zero. Can you see the Australian public accepting a 2 or 3 times increase in immigration to compensate?”

    Kevin Rudd – Paul R Collins – “Paul, this is a core question for the country’s long term future and possibily its survival. Our economy depends on three Ps – Population, workforce Participation and Productivity. All three must continue to be increased. On population, our natural birth rate has improved some what since the baby bonus and hopefully paid parental leave and a 50% child care rebate will help. Immigration should be maintained at a robust level is consistently in the vicinity of about 200,000 a year. I also believe we should be taking as many of those bright, young Europeans and Americans at present who can’t find work.”

    Note: any publishing of the above comment must reference macrobusiness.com.au as the source… πŸ™‚

  5. Thanks guys, an excellent discussion – again. Re: Ghost cities in Australia, the Sydney suburb of Zetland strikes me as being a great example. Every time I’ve been there, it’s seemed 3/4-empty….

  6. I looked at the linkage between property prices and the bottoming of the dependency ratio and I do not see it as strong.

    I believe property prices are linked to demographics but in a more subtly way than just dependency.

    The age profile is the key. The developed economies have a distinct population bubble the starts post WW2 and predates birth control. Japan has the most distorted and oldest population of the G20 countries. USA is about 10 years behind that and Australia is another 10 to 15 years behind USA. Neither USA or Australia are as severe as Japan. One country not too dissimilar to Japan is China but about 15 years behind in terms of where the population bubble sits.

    So Japan had the first and longest sustained hit to growth and is still unfolding. USA had a sharp hit and will likely level out for the next decade or so. Australia is still to reach the age profile that results in peak debt. Then there will be the unwinding.

    So population age profile correlates better than simply dependency ratio although there is some linkage between the two in countries where birth control is common place.

  7. The main issue is gov influence on economics now compared to 30 yrs ago. Now days, people have this confidence that under a worst case, gov will bail them out somehow?

  8. Great discussion. The eerie silence on these issues from our boomer politicians is hilarious.

    For me this really highlights the coming generational clash. We have a boomer generation that has set themselves up nicely as the rentseekers of the world, and they will not give up this easily.

    They will be searching for a way – any way – to keep this money and control. This fight will not be about economics and the boomers will be very very difficult to dislodge from this power-base for many many years to come.