Bernard Salt recently reviewed the employment data for the past six years and identified a number of insights that could give us an inside edge as property investors. We also reviewed the Department of Employment projections on jobs for the next five years to see if we can deepen these insights.
What are we looking for? For our exit strategy, the demographics that can afford to buy and push housing prices up creating capital growth; and, for our holding strategy – who is interested in renting our investment property.
Employment growth will tell us part of the story and the demographics the other part about those that have capacity to pay for housing, to buy their dream home and drive prices up.
Over the last six years about 160,000 jobs were created each year with a total of 1.041M. However, job growth wasn’t evenly spread geographically or demographically. Geographically the last year saw NSW create over 50% of all new jobs, many full time, as the State’s huge infrastructure projects moved through planning to roll out phase. We will review demographics in a moment.
The Department of Employment has forecast that 989,770 roles are expected to be created over the next five years or 197,940 each year. This is a large increase on the historic growth however many of these roles may be part time.
They forecast Health Care and Social Assistance to increase with the introduction of the National Disability Insurance Scheme, the ageing of our population and the rise of in home care services. There are expected to be 250,000 roles created, many part time and they will cover all geographies.
Secondly they predict Professional, Scientific and Technical roles to increase by 151,200. This workforce growth will be in construction and in infrastructure projects sectors. NSW has heavy investment in infrastructure and may take the lion’s share of these roles.
The third major area is education and training. The international education sector is forecast to be our primary export in years to come and is currently valued at $16B per year. About 121,700 jobs are forecast in this sector.
The fourth is retail with a forecast increase of 106,000 roles with strong emphasis on two broad sectors of hardware, building and garden; plus, clothing, foot ware and personal care. Accommodation and food services are also expected to increase with our low $A driving local tourism creating 98,000 roles.
Bernard Salt looked at the demographics of the historic growth and started with the groups that found new employment. He found that 433,000 of the 1.041M roles were given to employees in the 25 to 34 age group. These people are called the household forming segment. In comparison the 35 to 44 age group added just 108,000 roles. This means there is more opportunity for the first home buyers segment however this is the group that struggle to enter the major capital city markets of Melbourne and Sydney, and have very limited capacity to bid up prices.
Interestingly the 60+ segment had 252,000 jobs created over the six years and was double the growth of the 45 to 54 age group at 102,000. He argues this demographic offers the best opportunities with big payouts from down sizing the family home and are willing to pay more for the ideal property. What do they want? They want life style and downsizer properties.
However, the shocking news is that the 15 to 24 job market has only increased by 2,000 roles over the six years. While in the six years prior to this it increased by 181,000 roles.
Our exit strategy needs to be based on the capacity for capital growth. It is easy to see from this information why many investors target entry level pricing for housing. It is so affordable for all.
The niche for down sizing baby boomers is probably prestige apartments and sea or tree change properties. Some of these are much higher risk as they are in smaller communities where there is limited economic diversity and hence limited liquidity.
Our holding strategy considerations suggest we need to appeal to the 25 to 34 age group who have the money to rent and want the lifestyle having been students with limited employment opportunities. Getting investment property right is more complex that one size fits all for the advice, and the building block, the property. Tailoring your investments can significantly increase your results.