Peak Humanity – A new buzz word with significant impact

//Peak Humanity – A new buzz word with significant impact

There was much discussion throughout and since the Federal election around the ‘population debate’ with both sides of politics vowing to reduce the level of immigration. The reality is that these comments are just smoke and mirrors for two reasons, 1/ the current rate was unsustainable anyway so the policy’s are just trying to bring the actual rate back to the long term desired trend rate and 2/ they fly in the face of what is happening globally as we race towards Peak Humanity within a generation.

So, what is Peak Humanity?

Peak Humanity is a term coined by the United Nations Population Division to describe the point at which the world’s population will reach a peak and then go into decline. Their assumptions are based on the fact that advanced economy nations are already in decline, most of the developing nations are already slowing and will go into decline over the next decade or two and that third world countries will begin to slow and eventually decline in their growth rates due to education or environmental reasons. This is a theory supported by the Population Reference Bureau, an international research organization.

What is important to understand is that at a population of around 6.7 billion people, there are more people alive today than have ever lived in all of history together and the consensus is that over the next 40 years we can expect the population to grow to around 9.5 billion! This may seem like an exceptionally fast growth rate of approximately 40%, but it is a slower growth rate than we have experience over the last four decades. Keeping in mind also that Australia is currently growing at twice the world rate!

What it means for Australian Property Investors

Both sides of politics have discussed a long term Net Overseas Migration rate (all those arriving to stay minus all those leaving permanently) of around 180,000 per annum. This is the rate known as the ‘Mid Series Projections’ for net immigration by the Australian Bureau of Statistics and the rate at which most analysis and government policy is based around. The challenge here is that we have averaged a net immigration rate above the ‘High Series’ for most of the last decade. The Government is now trying to bring the rate of growth back to this ‘Mid Series’ rate in the face of a rapidly increasing world population which is increasing the demand for those who desire to immigrate here.

The ANZ bank produced a report in August that suggests that the current rate of immigration and low building approvals will increase the undersupply of property nationally from around 200,000 today to 600,000 by 2015 (in just 5 years from now!). The National Housing Supply Council suggests that if we can get the rate of population growth down to the ‘Mid Series’ and we can raise dwelling construction to  a ‘medium’ level then we won’t reach 600,000 to about 2020. I don’t like our chances of either happening and agree with Rob Mellor, the Managing Director of BIS Schrapnel who so eloquently said recently “If you think supply will ever reach demand, you’re kidding yourself.” A sentiment echoed by the ANZ.

As property investors we need to look beyond ‘policy statements’, media articles and ‘opinion’ to delve into the true numbers that drive the property market so we can make informed decisions. The reality is we are faced with a unique set of circumstances not seen before in our property market, issues so big they will drive public debate for the next generation. Issues that will work in our favour.

If you’re sitting on the fence, now might be the time to act.