Successful investment means reading the data …just look at global construction
Markets never move by themselves: they’re a barometer of billions of individual decisions made every split-second around the globe, everything from buying a packet of crisps to building a skyscraper: and this vast data set is routinely gathered up, sorted out, and crunched through (just like your crisps) to produce innumerable market movements.
So when, over the last decade, India’s burgeoning population (now the largest on earth) became progressively richer and more urbanised, the resulting increase in consumer demand pushed up the Subcontinent’s GDP by over 6% year on year: increased sales of emerging technology in India made Infosys one of the most valuable companies on the planet, and no doubt the sale of crisps went up too. As they say, when the herd moves…it moves, the impact on fast-evolving markets couldn’t be more striking.
It's not so much that those markets are self-correcting (we know from the 2008 Financial Crash that they’re not) …but they’re undoubtedly highly sensitive to change. So, as the shrewd investor you are (otherwise, you wouldn’t be reading this), how do you harness these trends and make the best use of the available data? Or is it really nothing more than Warren Buffet’s atavistic dictum: “The first rule of investment is don't lose money… and the second rule is, don't forget the first rule. And that's all the rules there are."
Well, it’s not that simple of course, there’s a lot more to it (with all due respect to the Sage of Omaha): you also need to stay fully alert to each of those complicated market and demographic trends, watch out for the headline signifiers, and focus, above all else, on long term returns. Then you might meet at least the first of Mr. Buffet’s rules.
Take, for example, the increasing importance of Modular Construction in global markets: we already know that progressive urbanisation on an industrial scale has radically increased global demand for housing, but if you’re looking for hard, herd-based data, the United Nations also reports there are now 1.6 Billion people worldwide who are either homeless or in dire housing need, and most of them are living in densely populated urban areas (www.developmentaid.org).
Over a thousand migrants flow into Mumbai every day, and the local population is expanding by 3% annually (set to double in the next twenty years: which is saying something, given the metropolis is already home to 25,386,000 people, 12,073 of whom are homeless (and that figure is certainly understated)). In Delhi, the numbers are even worse: 47,000 homeless, according to the 2021 Census (conducted on the same uncertain basis: you try counting a tide of humanity that moves ceaselessly every night).
No government committed to maintaining basic principles of social equality can afford to ignore these statistics, and, indeed, most governments don’t: Prime Minister Modi’s government launched the PMAY Programme in 2015, with the objective of building 20 Million new (affordable) urban homes by the end of last year. In fact, 12 Million homes were “sanctioned” before the deadline, with 7,256,000 completed units: so the scheme has been extended until December next year. On any basis, it’s an impressive achievement, but it still falls short of the original target…which is hardly a surprise.
Just take a look at the figures again: over the eight-year life of PMAY so far, some 907,000 homes were completed each year (presumably a lot less during the two years of COVID), which equates to 2,484 units every day. Pretty impressive stuff…but then look back a bit further: if 1,000 people are moving into Mumbai every day (and that’s just Mumbai), a single city where the relevant demographic is mostly single men, that absorbs nearly half of annual PMAY output by itself: so, what about India’s other major conurbations? What about Delhi, for example, where 875,549 new inhabitants arrived this year alone (www. worldpopulationreview.com).
Sure, we’re also dealing with an increasingly wealthy demographic on the Subcontinent, so not all these folk (our fellow citizens, lest we forget) will require affordable homes: but then (in Mumbai at least) they also face the challenge of house prices rising by 4.8% annually (www.outlookindia.com), as well as aggregate levels of demand that rose 15.2% last year, against a 3.8% increase in available stock: that’s near enough four potential buyers for every unit on the market, which is only going to push up prices still further.
There just aren’t enough homes to go round, that’s the simple truth…and India is by no means alone: in the UK, for instance, just 59,175 affordable homes were completed in 2022 (against a government target of 180,000: unsurprisingly perhaps, that seems to be a pledge Rishi Sunak is now preparing to scrap).
Building Smarter and Better
There, in a nutshell, or two, are your relevant data sets: but let’s also remember the mantra we started off with: stay alert to market trends, watch out for headline signifiers, and focus on the long term. And when it comes to current demand for public and domestic housing, that can all be boiled down to a single imperative…we have to build more homes, and we have to build them faster and smarter.
Look no further for an answer than Modular Construction: in stark contrast with traditional dinosaur methods, modern ConstrucTech technologies can create a new home up to 50% faster and at up to 30% less cost, which is just one reason why Modular is currently spreading like wildfire across Asian Pacific regions and seems set to capture the rest of the world’s markets too. Just think about it for a moment: by fully adopting Modular systems, PMAY might well have been able to deliver 14 Million new homes rather than 7 Million; and that, as they say, makes all the difference…
For an investor, it makes all the difference, too: the difference between making money and not making it. Warren Buffet would be happy…
Reading the available data makes all the difference when it comes to smarter investment…and global construction is a case in point.