The 3 P's

Population, Property, Prosperity… and your retirement.

Australia’s population will pass the 25 million mark this year. So how does population growth affect the average investor saving for retirement?

Until relatively recently, the issue of our nation’s population receives relatively scant public attention and many people would be surprised to learn that population growth is one of the key drivers of economic growth and indeed of Australia’s world record breaking streak of nearly 27 years of uninterrupted economic prosperity (i.e. without a recession).

The link between population growth and economic growth is well established and well recognized by economists and market observers, but less so among the general public.

Investment Bank, UBS, produced data from 2016 showing that since the global financial crisis, population growth contributed two-thirds of gross domestic product (GDP) growth (averaging 2.4% year on year), double its contribution in the prior 15 years.

Looking forward, in April this year a joint research paper by the Federal Treasury and Department of Home Affairs argued that maintaining our

current migration program will add up to 1% to annual average GDP growth because it limits the economic impact of the ageing population, and “in the absence of migration, Australia’s workforce would begin shrinking in absolute terms by 2020.”

Australia doesn’t have an official population policy, but a ‘de facto’ bipartisan one, in that both major sides of politics support the current immigration intake cap of 190,000 people per year, which makes up roughly half of the annual population increase of around 400,000.

Our prime minister and the treasurer have indicated that the current level of population growth, with its focus on skilled migration, is a key underwriter of ongoing prosperity.

What effect with the growing population have?

As our population grows there are number of major changes occurring below the surface of the headline figures including:

• Big demographic changes due to an aging population.
• People are living longer – by mid-century there will be twice as many of us over the age of 65 and four times as many over 85.
• A move back towards inner cities.

The ABS states by 2030 Melbourne is expected to be Australia’s biggest city at 8 million people. Sydney is on track to hit 8 million by 2050, with Perth expected to reach 4.5 million and Brisbane 4 million by this same time period. All up, Australia is projected to hit 40 million people by 2050.

The implications of these changes are vast. One of the more visible is that mass transit is the way of the future for Sydney and Melbourne and infrastructure projects in both cities are reflecting that.

How does our recent economic history and current growth outlook affect the individual seeking to builf a nestegg?

Its relevant to note that in 2017 commercial property was the best performing major asset class for investors.

And this is what we at Charter Hall specialize in: the purchase, development and management of investment grade commercial property on behalf of investors including ordinary mums and dads, SMSF members, high net worth individuals and major institutional fund managers.

We have developments across all major capital cities to assist with the growing space requirements in key markets and we actively work with policy makers to address the needs of the population under a growing population workforce and economy.

As the fourth largest owner of Australian institutional office property, second largest owner of industrial property and largest owner of convenience based shopping centres and Bunnings stores, we recognize population is a key driver in the underlying performance of commercial property.

Our ‘charter’, in short, is to enable Australians to invest in commercial property, be it in their personal name, an investment trust or via their super, through direct (unlisted) property funds such as the currently open:

• Direct Office Fund;
• Direct PFA Fund;
• Direct Industrial Fund No.4; and
• Direct Consumer Staples Fund.

Alternatively, investors can access unitized ownership of commercial property via Charter Hall’s listed investment trusts, which are listed on the ASX.

In summary, with population growth a key driver in the underlying performance of commercial property, those looking for investment options to save for retirement should consider the commercial property asset class as a strong option for their portfolio. 

To find out more, contact us directly or your financial adviser.