Daniel Gold: what if we lived to 150?

Living longer has massive implications for Australia's housing market, argues Young Gun broker

According to Harvard geneticist David Sinclair "the first person to live to 150 has already been born".  This was from the weekend AFR article Living to 150 will revolutionise markets.  

This is great news for long-term property investors
If trials go well, and Sinclair’s drug which repairs DNA and reverses the biological ageing works as expected, the Australian Bureau of Statistics (ABS) could be massively underestimating population growth, again (the ABS has revised its forecasts higher three times since 2003).

According to the ABS, our population in Australia is currently 24.8 million, and it is increasing by one person every 1 minute and 26 seconds. The formula for population growth is:  Population growth = Births – Deaths + Net overseas migration.  Clearly, if you reduce ‘deaths’, then population growth increases.

Interestingly, the ABS predicts life expectancy improvements will actually decline in the future (e.g. a reduction from the historical 0.27 extra years of life for each 12 months that passes, to only 0.12 or 0.25 extra years in their ‘medium’ and ‘high’ cases moving forward).  

But with life expectancy improvements, say at 0.50 extra yrs for each of the 12 months from 2016 to 2061 (implying people born in 2015 live nearer to 105, rather than 83 as the ABS is currently predicting), then our population would increase by around 6 million more residents.  That’s 6 million more than the 17.2 million already forecast!

According to the 2016 Census the average home currently has 2.6 persons living in it.  This average household composition figure is likely to decrease, as the latest ABS data suggests ‘single residence households’ will experience the largest growth out of all segments from now to 2036 (61-65% growth).

Even at 2.6 people per home, an extra 6 million residents would equate to an additional 2.3 million dwellings that need to be built (over and above the 6.7 million already forecast to be required).  

Now population growth is still just one factor that impacts house prices.  Affordability is another key factor (we need the economy and wage growth to continue rising), and the supply side of the equation also needs to trend downwards relative to demand in whatever market is being analysed.  

Fortunately, our economy is well placed to expand given our trading relationship with Asia (see this article for details), and we cannot create new land in the established suburbs near our existing city centres where new residents of the future are likely to want to live.  Sure houses can be demolished to make way for the development of new apartments, but this makes the supply of established housing even more scarce, and therefore valuable.

In sum, the ABS has grossly underestimated population growth in the past, and now anti-aging – this third possible revolution in medicine – could mean it’s all a little bit of history repeating.  

This is great news for savvy investors, and an example of the prospects for continued long-term appreciation in asset values.  

Daniel Gold has been a broker at Australian Mortgage Award-winning brokerage the Australian Lending & Investment Centre since 2015. Before then he was an entrepreneur and an analyst at UBS Bank. 

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