Population, The Driver

9th of April, 2020

Core to our Calnan Flack approach is the notion that there are 5 essential drivers of asset prices. When you understand how the 5 Drivers interact and learn how the credit cycle evolves you will become a far more successful investor.

The 5 Drivers of Asset Prices are:

  • Infrastructure
  • Technology
  • Government Granted Licences
  • Population
  • and Credit Cycles

The current Covid-19 pandemic provides us with the opportunity to understand just exactly how these drivers can interact in both a positive and negative way.

Population is always touted as the number one driver of property prices. A growing population leads to increased demand and basic economics tell us if there is an increase in demand without an increase in supply, prices can only go one way, and that’s UP!

Conversely, a decrease in population will reduce demand to an already static supply of properties leading to a downturn in property prices.

The mining boom of 2010, where mining towns felt the massive influx of workers as the boom marched on, provides an excellent illustration of the effect population can have on housing prices.

Regional mining towns like Emerald and Moranbah saw prices rapidly boom then dramatically bust. According to CoreLogic RP Data the median value of a home in Moranbah fell a whopping 66 per cent from $751,989 to $251,933 in the period 2011 to 2014.


Population, as we see it, has a much bigger impact on land values, housing and the economy than just the crude increase or decrease of citizens that most analysts focus on.

At Calnan Flack when we talk about Population we are including all the things that a population touches and impacts.

The problem is usually we just take all these things for granted and don’t see the real impact that population is actually having.

What we are seeing with the current “Social Distancing” is putting the role of the population under the spotlight allowing all of us to consider the real effect this driver has. Changes in the manner with which populations interact, have and will continue to have, significant impact on the economy and asset prices.

Social distancing has changed the way we as a society intermingle. Humans are social animals, yet now we are faced with an ever-increasing level of social restrictions.

It is not just the “No more coffee catch ups” but is the entire notion of no longer being able to gather in groups. It’s about having to work from home and restricting our travel.

This inability to meet in groups and growing self-isolation has turned our once bustling cities and social centres into complete ghost towns.

This change of social behaviour is having knock on effects as small hospitality businesses, such as coffee shops, are being starved of customers, resulting in plummeting sales, negative profits, job terminations and mounting business losses.

I am certainly not implying that the current commercial contraction is constrained to the hospitality sectors as many small and large businesses across Australia are undergoing massive economic upheaval, but I use hospitality as an example as it is easy to see the effect on a coffee shop.

Any change (either positive or negative) in the way a population interacts will have flow on effects. Think here about how population has undergone a massive shift towards urbanisation and the effect that this has had on our rural communities and economies.


Any time there is a change in the way society interacts it will have implications for the demand and appetite of entrepreneurs and business owners to secure the best locations to promote their businesses.

It all comes down to the change in the locational value of the land.

If you have any doubt about this concept, ask yourself – would you sign a lease and start a coffee shop right now?

The answer to this would be NO. The current constriction of walk by customers and their inability to dine in will affect the profitability of your coffee shop despite the quality of your beans and skill of your barista!

But let’s fast forward say 6 months to when things may return to normal, restrictions are lifted and as a society we return to our normal way of life, the locational demand for a well-located coffee shop will return.

In fact, like the share market, such a downturn will quite possibly remove weaker opposition, placing those who are able to reopen in an even stronger position due to the lack of competition.

It is this concept that will ensure that the stock market will offer terrific investment opportunities at the market lows.

I do sincerely hope that ALL business, no matter their location or size are able to reopen and that any job losses are only temporary, but this may be just wishful thinking on my behalf.

The 5 Drivers continue to work in the downturns but in different ways to how they work in the good times. Given we have been in an upturn since the March 2009 low in the All Ordinaries Index, we are not accustomed to recognising the drivers in action in a downturn.

These downturns provide an opportunity to purchase assets at prices that we have not seen for years. The drivers and the cycles continue.

Please stay safe during this pandemic, show some compassion and ensure your friends, family and neighbours are safe.


If you want to avoid the mistakes of not understanding the dangers of investing without an understanding of the Economic Cycle, then why not have a chat to us about how we can help?

You have nothing to lose except a few minutes of your time and everything to gain.

So… let’s get started.

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Disclaimer: Any opinions or recommendations expressed here do not purport to Financial Advice but rather should be considered General Advice and does not take into account your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate to you and whether you should act upon it. Should Financial Advice be sought, we suggest you seek such advice from an appropriately qualified advisor. Any growth rates, yields, rental income, tax rates, interest rates, depreciation rates, inflation rates Dividends per Share (DPS) and Earning Per Share (EPS) etc shown are estimates only and should not be used as a guide to future performance. Past performance is not necessarily a guide to future performance and should not be relied upon for this purpose. Authorised Representative of PGW Financial Services Pty Ltd – AFSL 384713 ABN 15 123 835 441.