Aging Population Likely to Plateau Apartment Demand

The popularity of apartment living in Australia could slow over the next decade as Gen X and Gen Ys seek homes with additional space, revealed the latest “Emerging Trends in Residential Market Demand” report, released by leading industry analyst and economic forecaster BIS Shrapnel.

The report, which examines trends in Census data over the last 20 years, revealed that 20-to-34 year olds will undergo a transition from apartments to new houses as they begin to move on to their next stage in life. This age sector, which according to BIS Shrapnel has been a prime driver of apartment occupancy over the last ten years, has undergone a significant increase in population over the past decade, partly stimulated by the generation of Baby Boomer children and partly by Australia’s elevated overseas migration.

“The growth in the 20-to-34 year old group has fuelled occupancy of units and apartments in the inner and middle suburbs of the capital cities over the past decade, mainly as renters,” said Angie Zigomanis, senior manager of BIS Shrapnel. “However, as this group increasingly moves into their late 30s and early 40s… the question is whether they will still live in medium and high density dwellings.”

Mr Zigomanis predicts they won’t – potentially sparking a jump in the demand for new housing construction, and the long-term stabilisation in medium to high density dwellings. “Assuming the current 20-to-34 year olds in multi-unit dwellings move on to a separate house, as has already been evident among 35-to-49 year old households, then this will translate to higher demand for new detached houses.” As a result, Mr Zigomanis said that the housing industry should look forward to a boost in new home construction in the near future.

Moreover, retirees and over- 65s ‘downsizing’ are not likely to drive demand for higher density housing either, with Census data revealing no hard evidence that older Australians are swapping their  large homes for apartments. However, BIS Shrapnel revealed that 38 per cent of 50-64 year olds entering into retirement over the next ten years will still have a mortgage and the report suggested that a noticeable downsizing trend is likely build in the future. “Unless the occupants elect to remain in the labour force, there will be an increasing number who are likely to sell out of their dwelling upon retirement to move elsewhere or into a lower priced smaller dwelling to reduce debt,” said Mr Zigomanis.

Despite the assumptions made by BIS Shrapnel on the future movements of apartments and new development, Gen X and Y sentiments on housing could swing in another direction. Mr Zigomanis said an alternative scenario is that 20-to-34 year olds may choose to accept living in medium and high density dwellings as the new norm, thus creating a new demand for a different type of high density property appropriate for families. BIS Shrapnel said this scenario would most likely occur in Sydney, where households have a higher tendency to live in medium to high density housing.