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1.5 vs 2.1 vs 1.24 – Population growth or Ageing nation

Source: https://www.macrobusiness.com.au/2017/01/2017-demographia-housing-affordability-survey/

Birth rate of a nation determines if the population is growing up or going down. The minimum birth rate per woman needs to be 2.1 for the population to be growing very slowly. Any number lesser than 2 means the country is getting smaller every year. I contributed two. So, just on the dot. 2 means I am still below Malaysia’s average. A growing population meant that demand for housing would continue to grow. What happens when the population stops growing? Then it depends on how far is the supply away from meeting existing demands. When the supply is struggling to meet the demand, property prices would still go up. There are many such examples in the world today. An image showing how affordable or unaffordable a typical home is for some countries we know around the world.

By the way, more supply does not mean everything built would be accepted by the potential buyers. Sometimes mismatch happens and the unsold units would continue to pile up but that does not mean supply is more than demand! Coming back to the actual increase in demand. It has to come from more population. When couples get married, they may move into their new home from their parents’ home. One extra unit of a new home needed.  When they have babies, they want to upgrade. This meant another unit is needed. Their first unit could be sold to newly married couples or even rented out to tertiary education students. Their kid(s) would grow up and when they get married, they would need another unit of home and so on. When this couple gets older, they may prefer a smaller unit or perhaps even a more integrated one instead. They would then get themselves another unit while their current home could be sold to some other families. They would also help their kids buy homes. This is just the demand from existing population and has yet to include international students, foreign tourists and even foreign workers / professionals. Many times, the demand for these new properties would be in major cities where urbanisation continues to happen.  This is the reason why property prices tend to rise faster there when compared to some smaller towns or villages.

In case you think the figure of 2.1 for Malaysia is considered low, let’s look at two more countries right next to us? Thailand’s birthrate is down to just 1.5 despite the efforts of the government to encourage more births among its people. In an article in channelnewsasia, it said that this 1.5 number is lower than Cambodia’s 2.6 and even Malaysia’s 2.1  The article quoted World Bank figures which said that Thailand and China has the highest proportion of elderly people of any developing country in East Asia. It said that the population has already peaked and should start to decrease in 2030.Once this happens, it also meant that Thailand would start to face potential economic problems including labour shortages and a smaller base of income tax payers as the working-age population shrinks. (By 2050, Malaysia would start becoming an ageing nation too)  The birth-rate for Singapore is 1.24 in 2015 and this is despite the government giving out cash incentives to new babies. Here’s an earlier article in cnbc.com

When the birthrate has slowed, then the nation starts to become an ageing nation. For Malaysia, it’s not that far away. By 2040, it is estimated that we would become an ageing nation. By 2050: 24 percent of Malaysians are 65 and above. For ageing nations, the demand for goods and services may change but on an overall basis, the economy may grow slower. The first thing is however an ever extending of the retirement age. Imagine the number of working population shrinking to almost the same number as those retired? I think you get the picture. Due to this, the government’s expenditure would also increase but how would it be able to fund these? For the remaining working ones, the taxes to be paid may start to inch higher too. Oh yeah, the demand for property will definitely change and start to decrease too. Start planning yeah. For Malaysia, it’s around 22 years away. If you ask me, then my answer is that it’s definitely still safe to buy a property lah. Cheers.

written on 17 Feb 2018

Next suggested article: 4 to a home versus 3 to a home, the significance?

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