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145: High impact global investment - population explosion in India and other countries


07-14-2007

PropertyInvesting.net team

The PropertyInvesting.net team have performed an analysis of global population trends. This unique analysis provides an insight into the highest impact population growth areas for property investors. This is important as GDP growth often mirrors population growth, and as cities and areas expanding in population, business growth increases, land shortages develop, housing demand increases and asset prices tend to follow. So for the Global Property Investor, these insights provide key pointers to where one should invest. Where demand is likely to be strongest - residential, commercial and land demand will rise and asset prices and rental prices should follow.

The Population Growth Impact chart below takes the population predicted in 2050 and multiplies it with the percentage population growth predicted from 2002 to 2050. This measure can be described as the proportional impact the population increase has within the global population pool. The key conclusions are:

·         India will have the biggest increase population impact, followed by Nigeria, Congo and Saudi Arabia

·         Pakistan, Bangladesh, Indonesia and Yemen will also have a large impact

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If we take the Growth Index from a historical 1950 to 2050, this illustrates how massive the impact of the population explosion has been in India, Nigeria and Congo in particular.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If we break out the actual increase in population of these countries, a similar story unfolds - again:

·         India, Nigeria, Congo, China and Bangladesh have a huge increase in numbers – USA also has a significant increase

In actual numbers of people, again:

·         India is predicted to have the biggest population in 2050 (1600 million), followed by China (1450 million). USA will also be around 400 million people.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If we now predict which countries may be best to invest in property, one would normally choose the countries where the highest GDP growth is predicted. This is difficult to predict, but China has had 10% GDP growth for the last 10 years, and India in the range 7-9% for the last 5 years. If we ignore the impact of any energy crisis, war or political crisis and acknowledge that Indian and Chinese education and entrepreneurial business behaviors and motivation will increase rapidly from 2007 to 2050, one gravitates towards thinking India and China are the global property investment countries with the biggest growth potential for asset price increase. To focus on cities where big business is moving in is probably prudent – so our overall conclusion is:

India – Mumbai, Bangalore, New Delhi

China – Shanghai, Guangdong Province, Beijing

Saudi Arabia is an interesting possibility – we predict an energy crisis will develop in the next five years (starting June 12th 2007 with our realization and prediction from an internal workshop that the days of cheap oil are at an end) – so Saudi Arabia is likely to benefit from having the largest oil reserves in the world. Investment in Riyadh is possible if foreign ownership rules loosen up.

High risk countries are Nigeria and Congo – however, we do not for the time being recommend investment in high risk countries, unless you are local to that area and can see and de-risk good opportunities through due diligence and having the best professional support staff and legal help.    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

USA is a good long term investment area and despite the growing deficit the fundamentals are very encouraging for continues steady property price gains after the cooling in late 2006 to mid 2007. For all those Doubting Thomas’s – the USA is the only significant OECD developed country that will see a significant increase in population in the next 30 years. This will drive real estate prices higher as GDP growth is driven by this population increase – land shortages is cities will become more common. The fundamentals are good as long as the US deficit is kept under control.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General view: In 30 years time, USA, China and India will be driving global economic growth. The Western European population will be in decline as will Russia’s and Eastern Europe’s population. The USA had 150 million people in 1950, has 295 million today and will have 365 million by 2030. Areas of particular interest are:

·         Florida population will grow by 12.7 million (80%)

·         Texas population will growth by 12.4 million (60%)

·         California’s population will growth by 12.5 million (37%)

The USA will see big movements in GDP, business growth, employment and real estate prices should follow this trend. But to expose yourself to the biggest potential property growth markets, India and China and likely to be the places to invest in.

We hope you have found this special report helpful – if you have any comments or enquires, please contact us on  enquiries@propertyinvesting.net      

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