I HAVE a theory about business, market opportunity and demographic change.
My theory is that business is so finely tuned to shifts in market demand that it supplies not only to baseload, but it also supplies to anticipated ongoing demand. Let me explain.
The demand for housing is largely driven by population growth. Sure there’s an upgrader market as well as a market for housing resulting from separation and divorce or indeed from shifts in market preference from say suburbia to seachange to apartments. But mostly it is net population growth from one year to the next that drives demand for household formation and for housing.
In the year to June 2013, this nation expanded by 407,000 residents, including 244,000 from net overseas migration. Just two years earlier in the year to June 2011 the net growth figure was 308,000, with net overseas migration then sitting at 180,000. Over the two years to June 2013 migration ramped up as did births, from 301,000 to 311,000.
The building industry builds housing to accommodate demand from the baseload population of 23 million, but it also builds to meet demand from the expected rate of growth. And since 2011 this growth figure has pushed up largely as a consequence of an easing in immigration controls.
Net overseas migration peaked at 300,000 in the year to June 2009 when prime minister Kevin Rudd said he believed in a big Australia. The policy response was panic. Immigration plummeted the following year to 196,000 and to 180,000 the year after that.
Once the big Australia issue had subsided the immigration levers were reopened and as a consequence we are now in an era of rising population growth with a consequential rising demand for housing.
But there is more to tactical demographics than rationalising whether the market is rising or falling at an aggregate level.
That aggregate demand for housing in the coming year is likely to be "a bit more" than the previous year based on population trends is a reassuring insight, but it doesn’t represent a business opportunity. Tactical advantage in business comes from acting on a directional shift in the market.