The long awaited 2016 Census data results have indicated what many of us have known for a long time – Australia’s population is ageing.
This census data shows an ageing population, which means less tax payers each year to support retired folk, making Australia a ticking time bomb for those looking to rely on the state for their retirement. The pension age from 2035 will likely be 70 years of age, and unless you want to live on around $400 a week (or around $300 each as a couple) – Australians need to get serious about becoming financially independent in their own right, and invest wisely.
Drilling down a bit further with the Australian Bureau of Statistics (ABS) Census data, we can see some interesting trends:
- The median age is now 38 compared to 37 which was the median age in the last census figures in 2011
- One in six Australians are now aged over 65, compared to one in seven in 2011, and only one in 25 in 1911
- 1% of Australians are over the age of 85 – an increase of 84,000 since the last Census
- There are now 3,500 people aged over 100
What does this Census data mean to you from an investment viewpoint?
Well if you make the right choices, this kind of information can expose some excellent opportunities for investors, and be pure gold when deciding how to tap into growing market segments. The ageing population, plus the trend toward downsizing can lead you in the direction of stable, affordable, investments with good long-term prospects.
Even though the last census data has been out for a short time, we’ve already noticed property marketeers use these ABS statistics to support their claims of great investment opportunities, particularly in relation to retirement villages. From our perspective, this is where investors would be wise to do their research properly and not get caught up in the spruiker hype.
While retirement village or seniors accommodation properties do satisfy a particular target market, there are numerous reasons why they would rarely add up to the best investment choice. Here are just a few:
- Niche Market. This type of investment immediately cuts out a large portion of the population, as the tenant would usually have to be at least 55 years old to qualify to reside in the property
- Problematic re-sale potential. These properties are often smaller than usual and designed for a specific type of tenant. If this particular market segment changes, then this style of property may not suit the normal rental pool and therefore the value would drop significantly (if you could find a buyer)
- Ongoing management fees. These properties are often advertised as having high gross rental yields, however they often have equally high ongoing management fees (either on-site or body corporate) which are rarely made clear by the people selling these properties
- Banks don’t like them. This is the sting in the tail, as very few lenders find seniors accommodation acceptable. If you can find a lender that is willing to finance these, they will only do so on a conservative loan to value ratio (LVR) of around 50-60%. A normal LVR for residential property is 80%, meaning that you will have to provide at least double the deposit required for a typical investment property
- Another shock in store for people investing in these niche market properties is that the ability to borrow against the equity of one of these properties is almost zero. A good question to ask is if the banks don’t like these properties, then why should you?
ABS Census data statistics can be useful in making investment decisions but they must be used in conjunction with other key data. Above all else, any property investment decisions you make should be based on the potential performance (Capital Growth & Cash Flow) of the property and how it fits in with your particular circumstances and strategy.
Please get in touch with us if you would like to discuss your particular circumstances, and drill down into what may be the very best investment for you.