Australia’s property market sweet spot revealed in population data

The best asset Australia has is its capacity for measured and responsible population growth in the years ahead.

At what time over the course of a century is it best to have been in, or to be in, the business of property development and/or investment in Australia?

It’s a big question. Perhaps your success isn’t entirely due to your hard work; perhaps you’ve simply been in the right place at the right time.

Indeed over the course of a century between say 1971 and 2071, when are the demographic settings best for property investment and development (or indeed for taxation)?

In the attached chart I track population levels by age group: 0-14 (kids), 15-64 (workers/taxpayers), 65+ (retirees).

Let’s say that as a property developer you’re looking for 30 consecutive ‘good years’ during which demand for property rises without serious interruption. Let’s also assume that you want this run of good years to start when you turn 35.

By that stage of life you’ve probably acquired the requisite skills and built a business network; now is the time to go out on your own.

Over the 100 years to 2071 the Australian population is projected to increase from 14 million to 39 million.

Personally I think this projected figure will settle in the low 40s, as Australia continues to train and attract skilled workers and as we prosper selling food, energy, resources and lifestyle to an increasingly crowded world.

Across the century to 2071 the time when the worker and taxpayer cohort (aged 15-64) reached its peaked was when they commanded 67 per cent of the population between 1987 and 2013. This 26-year period was when Baby Boomers straddled the (late) working years of the life cycle. Arguably this era was when spending levels should have peaked.

However, another way of measuring ‘peak times’ is when there was greatest absolute increase in the population aged 15-64.

More people in the peak earning and spending time in the life cycle should compete up the value of residential property. Between 2006 and 2029 the number of Australians aged 15-64 is calculated to have regularly risen by more than 200,000 per year (including two 300,000+ years when borders reopened post Covid).

Based on this measure we are right now in an era of peak growth in worker/taxpayer numbers driven by the Baby Boomer surge and by Gen Xers born in the late 1960s. Across the 2030s and beyond, the number of Australians added each year to the working-stage of the life cycle will scale back to barely 100,000.

The time to have been in the business of building, selling, outfitting new and upgraded homes is during the quarter century from, say, 2005 to 2030.

Property developer gains

Which means that the (property developer) cohort most likely to have benefited from this surge in worker/taxpayer growth will have been born up to 1970 and thus aged 35+ in 2005.

But this assessment relates to the peak in the 15-64 cohort. The peak in the 0-14 or ‘kid’ cohort, driving demand for schools, toys, sport, childcare services within the 1971-2071 century applies to the tail end of the baby boom.

And that is 1971 and 1972 when this cohort represented 29 per cent of the Australian population.

Exactly a century later this cohort will comprise just 14 per cent of the population.

It could be argued that the 0-14 kid cohort will therefore progressively lose relevance across the century to 2071 as other segments expand, for example retirees.

However, quite the reverse is likely. Proportionally fewer kids means that childhood becomes a precious and rare commodity; children are special; the wants of children become elevated in a society where there are proportionately fewer children.

Plus, while the kid population is shrinking as a proportion of the entire population, the absolute number continues to rise. The highest number of young Australians aged 0-14 in the century to 2071 is projected to be 5.7 million in 2071.

It is in the 65+ cohort that most business opportunity lies, especially over the coming half century. This cohort comprised 8 per cent of the Australian population in 1971. By 2071 this proportion will triple to 25 per cent.

In the 1970s the number of Australians aged 65+ increased by 30,000-40,000 per year as life expectancy soared due to better healthcare.

However, in the 2020s the annual increase in this cohort is around the 160,000-mark. We are currently passing through a five-year period (2025-2030) shaped by peak annual growth in this age group. And the reason is that older Baby Boomers have yet to ‘die off’ and younger Baby Boomers are still trickling across the 65-line.

Retiree boom

The time to be in aged care, to be selling Rhine river cruises, to be arguing for the rights of retirees, to be talking about the role of grandparents, to be in the business of hip replacements, is right now. At no other period in a hundred years (1971-2071) will so many people be added to the retiree bucket every year than right now.

The 65+ retiree ‘crest’ will continue to the mid-2030s before subsiding due to Boomers dying off at a faster rate than Gen Xers are spilling across the retirement line at 65.

This suggests that the time to be in aged care is right now. And that the time to sell out of your aged-care empire is soon after 2036 when annual growth in the 65+ cohort starts to slip from 143,000 per annum to 73,000 in 2043.

The point of this exercise is to show that the underlying demographic bedrock really does affect the prospects of businesses built on that foundation.

And it makes sense.

Boomers did dominate the core working stage of the life cycle from the 1970s through to the early years of the 21st century.

That was the time to found a home building (or funding or decorating) business. Australia was a youthful kid-focused baby-boom community in the 1950s, 60s and 70s. And the only reason childcare wasn’t a priority at that time was because stay-at-home mums still did most of the care.

Even so, as a growing nation Australia still hasn’t reached let alone passed peak kid; there will be more kids in 2075 than there are in 2025.

And then we come to retirees. Yes, the 65+ market will rise from 4.9 million today to 9.9 million in 2071. Which means that we will see a far more nuanced life cycle beyond the age of 65 in the decade ahead. Instead of the 65+ community being regarded as a single grey amorphous mass it will break down into segments: 65-74 the active lifestylers; 75-84 the transitioners; 85-94 the reflectives; 95+ the late-lifers.

This exercise shows that some ‘growth eras’ are over; a different demographic bedrock now prevails. I don’t think we’re ever going back to a baby boom. It also shows that Baby Boomers are currently on the edge of the great abyss. It shows that in a growing nation like Australia there are always opportunities for business.

Population growth underpins demand for more houses, shops, schools, hospitals, infrastructure. The best asset Australia has is its capacity for measured and responsible population growth in the years ahead. And especially at a time in history when other developed nations are contracting.

As a property developer and/or investor, where else would you rather be?

Bernard Salt is founder and Executive Director of The Demographics Group; data by data scientist Hari Hara Priya Kanan