How the Asian Century drives property profits

How the Asian Century drives property profits
March 27, 2019 Simon Pressley

We have entered an extraordinarily promising time for our nation’s economy. Future generations will look back and either applaud the way we seized the prospects or be disgusted with how the opportunities were squandered.

I say, let’s choose wisely.

The globe is now 20-years into the Asian Century and Australia’s position physically, culturally and economically give it an “unfair advantage” within the theatre of western civilisation. We just need to give it the attention it’s due, or risk looking back with regret.

What is the Asian Century?

The dominance of Asian nations and their influence on the global economy is now established. Looking back through the analysis, it’s easy to understand why Australia’s good fortunes have been so firmly hinged to Asia’s growth.

The global population number sits at around 7.7 billion people, and of that, 4.6 billion are in the Asia Pacific region. That’s right – 60 per cent of the world’s population is right on Australia’s doorstep.

In fairness, this shouldn’t be a startling revelation. Our region has always encompassed the weight of numbers.

But in the last 20 years, the influence of this territory seems to have grown exponentially, and that has more to do with aspiration than population.

Until the early part of this century, many living in the Asia Pacific were subject to poverty. This included primitive housing, a protein-limited diet and inadequate educational opportunities.

But there is a distinct demographic shift underway. The OECD estimates 2.9 billion people will move from poverty to middle class from 2009 to 2030 – that is a monstrous number of motivated consumers!

It is the biggest economic transformation the world has seen since the Industrial Revolution of the 18th and 19th Century.

Australia – the luckiest country of all

The rising ambitions of the Asia Pacific population presents a chance for Australia to hit it big. We offer the resources and skills that present trade opportunities set to feed Asia Pacific demand and fuel our future economy.

Construction is one area where we’ve already provided the building blocks of growth – and demand looks set to continue. Countries like China, India and Vietnam need to build entire cities so billions of people can relocate away from primitive living to more modern centres. This creates huge demand for resources and energy like steel, concrete, bitumen, copper, aluminium, zinc, coal and gas.

The expansion of Chinese cities was a great demand driver during the mining boom from the late 1990s through to 2012. It was a big part of why Australia enjoyed such a soft landing when the rest of the world was suffering a GFC hangover.

As you can see from the chart below, we have much to thank Asia for during 2004 to 2012, and my analysis shows we are heading into a second wave of gains.

Raising the living standards of the Asian middle-class means desire for the sorts of services the average Australian already takes for granted.

Access to reliable finance, legal, insurance and accounting services are imperative for their continued growth.

The new middle-class are planning for the next generation too, placing demand on education services so their children and grandchildren can create even more opportunities. Education is now one of our most profitable industries as we welcome international students to our shores.

There’s also cultural growth providing benefits to Australia. Travel among the Asian population is exploding with huge numbers of passport holders still to visit our shores. They want all that a middle-class life offers. The world-wide tourism boom commenced in late-2012, and in 2017, one in seven new jobs world were in tourism.

 

Related article: Why tourism is important to property markets

 

This has a domino effect. Asians visiting Australia will be exposed to things such as our high-protein western diet. When they travel home, there will continue to be demand for protein and premium produce. A great thing for our agricultural sector. Even today we are referred to as ‘Asia’s Food Bowl’.

Who will benefit?

The evolution of Australian property markets responding to demand from Asian Century stakeholders is easy to spot.

For example, when mining was the powerhouse of our nation’s economy at the start of the 2000s, resource states like Darwin were Australia’s best-performed capital cities. In fact, large parts of regional Australia (especially QLD and WA) saw prices double within five years.

Related article: Darwin’s untapped potential

Related article: Are we heading back to the [prosperous] future?

As demand washed through from resources to service industries, you can track how our big capital cities benefitted. Sydney was an underperformer up until early 2013, but Asian investors and a booming services sector led to a property market growth cycle that produced 65 per cent value gains. Melbourne followed suit, too.

In more recent years, as tourism and agricultural demand took hold, regionals and smaller capital cities have benefited. The foreseen growth of tourism and agriculture is one of the big reasons Propertyology began investing in the Tasmanian market in 2014. Propertyology’s analysis helped clients be part of a real estate boom in Hobart that’s now exceeded Sydney and Melbourne’s – and there’s more to come!

Regional agricultural centres have been on the rise in the past three years, too. From 2016, job growth started to pick up in several regional locations with specific agricultural products. Many of those property markets have produced double-digit growth in 2018 – a time during which seven out of eight capital cities performed poorly.

Related article: The Class of 2018 – Australia’s best property markets

Indicators for the future

Understanding the past helps us plan for the future at Propertyology.

Locations which take advantage of employment opportunities from the Asian Century have the potential for super-charged property markets, and many are regional centres, not capital cities.

Related article: Property market outlook, boom conditions

We are tracking a range of information to determine how best to take advantage of the Asian Century in the coming years.

For example, Free Trade Agreements help us identify which commodities will benefit most, where in Australia these are most productive, and what key employers will decide to do in response.

Tourism boosters are also key. Airport expansions, especially in regional locations, make our nation more accessible for overseas visitors. Upgrades to airport infrastructure help increase passenger volumes, improve demand for local goods and services, increase employment and create better conditions for property buyers.

Other key elements include infrastructure which helps grease the wheels of commerce. The planned $10 billion inland rail freight project will connect Melbourne to Brisbane is a great example. This will allow much higher volumes of products from regional Victoria, New South Wales and Queensland to be distributed.

Best of all, you don’t need a billion-dollar bank balance to profit from the Asian Century. Opportunities to be part of this extraordinary wealth-building event are open to all – you just need to have a thought-leading analyst (whose daily role is to identify leading indicators) and a multi-award-winning buyer’s agent on your side.

 

Propertyology is Australia’s premier property market analyst and award-winning buyer’s agency. Every capital city, every non-capital city, we analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

Here’s an example of how we’ve helped clients.

%d bloggers like this: