Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go Hmmm...one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Sunday, 29 June 2014

UK demographics

Interesting data from the Office for National Statistics in the UK shows that the UK population is forecast to expand to above 70 million by 2037.

In the decade to 2022, the UK population is forecast to increase by a troublesome 3.8 million (+7.2pc).

Given that Britain has not even been able to keep pace with housing the existing population of 64 million effectively, this appears very likely to result in a housing market crisis.

The great bulk of population growth is now being driven by international migration as much as it is natural increase.

Unsurprisingly London and the South East are seeing population growth accelerating at well above the average for England, with on average 7pc growth forecast for England over the 10 years to mid 2022.

The population is expected to growth by more than 15pc in Cambridgeshire and London over the coming decade, which can surely only result in increased pressure on those housing markets.


Source: ONS

The fastest growing boroughs in and around London are expected to include Tower Hamlets, Barking & Dagenham, Redbridge, Islington, Kingston upon Thames and Barnet, which all join Cambridgeshire in having a population growth forecast of well above +15pc.

However, the population is expected to grow by only 3% in the north-east, and in Barrow-in-Furness the population is expected to decline further over the next decade, as it is too in Blackpool.

One of the biggest challenges for Britain is that the fastest growing demographic over the next decade will be the over 65s (+22pc). 

Indeed, this demographic is expected to increase by between one quarter and one fifth across every British region in the next decade.

For those thinking ahead, as I considered here, the property type in shortest supply is likely to be what the Poms call 'bungalows', i.e. single storey dwellings.

For obvious reasons, this property type will be in high demand from the over 65s, but while bungalows were previously built extensively across East Anglia, new brownfield site developments are far more likely to be of the medium-density/multi-storey type, in order for developers to maximise profit per square metre.

"The fastest growing section of the population and as such the one which will be a major driver of the coming housing crisis, is the over 65s, the number of who is expected to increase by 50% in the next couple of decades, to 15.5 million by 2030.

There is a chronic shortage of appropriate housing stock for downsizing in old age. 


"Survey after survey has shown that the preferred home for pensioners would be a bungalow - indeed it would be the home of choice for around a third of the population. However, bungalows constitute just one in 50 British houses".

It appears that developers are unwilling to build more single-storey homes due to the land space they take up which does not fit well with the developers' preferred density of 35-50 dwellings per hectare."


Summary

To me the data continues to imply that if you want capital growth, keep owning properties in London, Cambridge and parts of the south-east, and if you want value for money, look for a house elsewhere.

In particular, the regions around London are likely to descend into a deeper housing crisis for these reasons:


-growing population as noted above



-population migration towards one part of the country (south-east of England)



-population choosing to live in different property types



-diabolical planning and endless political wrangling



-widespread NIMBYism and environmental concerns about population spread into the green belt land



-expensive demolition and construction costs



-difficulties obtaining construction finance.