With a changing national demographic and financial situation, here is what we see the future of the residential and investment markets. The change will cause a major rethink for many as to the merits of owning an investment property and for that matter home ownership:
1. Many will be forced to compromise on their housing choices
2. Way less houses will need to be built in the future. In fact, a whole lot less than many think
3. Dwellings will need to accommodate sharing – either by tenants and/or blended families
4. Fewer sales than in the past with the biggest falls expected in investment sector
5. Being conveniently located near major transport routes will become dominant theme
6. Limited price and rental growth, if not falls in real terms.
7. There will be more tenants, but with less money available for rent.
8. Fewer property investors – as the easy gains of the past are now largely gone.
Why? Here is what we are thinking:
Wage growth. Very little real change in household income over the past 10 years, with falls in real average household income since the last census. Contraction in the size of the ‘middle class’ and a large increase in the number of Australians in struggle street. Nearly all households will have taken on more debt.
Demographics. An increase in those living alone or as a couple, plus an increase in blended households coupled with a drop in what many still think is the standard Aussie household, mum and dad and 2.5 kids. The proportion of those living alone or as a couple over 60 years of age will have increased too, especially women over 60 years; sadly, most with limited financial means.
Workforce. Many more will be working a range of casual or part-time jobs than the regular ABS labour force data series suggests. As part of this trend, more oldies will be working than in previous generations. Most are doing so, because they have to, financially, rather than because they want something to do. The promoted image of Australian retirement is a happy couple walking along a beach at dawn or dusk is not going to be a reality for many.
Ownership. Recent reporting has illustrated this trend. Less home ownership for those in the typical first home buyer age group; even falls in home ownership rates for those in their 40s and even 50s. Don’t be surprised to find that two out of five households now rent, up from 33% only five years ago. In the coming decade, one to two Australian households will opt to rent, not buy.
Household size. More people are living in blended households. The now defunct baby bonus was taken up with gusto, so lots more kids in our population mix and migrants to Australia are generally young adults, with an average age of around 30 years, so they have or want kids, too. Plus, the mix from overseas has changed, with more migrants now coming from those countries with large family units.
Space. Tenants are not only staying longer but they are subleasing space in order to afford the rent. Owner residents are also now turning to the likes of Airbnb to help cover the mortgage. Others are now renting out homes that were once locked up or used occasionally. This trend towards utilising our spare bedrooms or even homes - despite the recent rise in off-plan overseas buying (and the penchant of Chinese towards locking up assets) – we believe, is on the increase.
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