At one time not too long ago, the Great Australian Dream was relatively easy to define; a large brick house in which to raise your family, surrounded by a vast green expanse of suburban land.
But then a brave new world came along, full of promise and wonder, as we were introduced to the marvels of modern technology and thrust headlong into an entirely different way of life.
The pace has undeniably quickened, with;
- advances in how we work changing the nature of when we work;
- more of us entering into a highly competitive global corporate arena, as China swallows up the manufacturing industry; and
- constant global connectivity and interaction with infinite information thanks to the worldwide web.
Of course, if how we work has changed so dramatically since the turn of the century, logically, so too has the way we live; how we spend our downtime, our ideas and ideals about life and major decisions made along the way, such as when to start a family.
What has all of this got to do with property investment?
Well, property by nature is about people. Housing fulfils one of our basest needs for shelter, ergo people, and our changing requirements of said shelter over time, are the most fundamental of all property drivers.
Understanding human behaviour and knowing how to interpret the way our behaviours change and evolve, according to our environment, is one of the most beneficial abilities the successful long-term property investor can possess.
Remembering it’s homebuyers and tenants who make up the investor‘s market, you can see how knowing what drives the purchasing or renting habits of these groups could give you the competitive advantage when it comes to asset selection.
Interestingly, it’s important to note that the faster pace with which we carry out life has not only impacted us directly, but everything around us. The ebbs and flows of our various markets are becoming more frequent, with the length of cycles decreasing as consumer sentiment surges and wanes more rapidly, off the back of constant and immediate financial news on the Internet.
For property investors, acknowledging these shorter market cycles can mean the difference between someone who gets tripped up by media hype about booms and busts, and someone who calmly rides out all the noise to focus on their own big picture.
A little bit of history…
I’ll refrain from giving you an entire history of the average Aussie’s home buying habits since the 1700s, however it’s pertinent to have some idea as to where we have come from, in order to establish where we are headed because, after all, trends and history do tend to repeat and cycle.
The expedited version goes something like this…
- Parents of baby boomers rise from the ashes of the Great Depression in the nineteenth century. Their offspring generally grow up in working class families and many go on to want ‘more from life’ than what their parents had.
- In the eighties, adult boomers are introduced to the concept of ‘having it all’ and subsequently see size as status. The suburban family home morphs into McMansions, as new housing estates swallow up acres of farmland and increasing migration gives rise to accelerated demand for housing construction. We spread out, while other countries spread up.
- In the nineties, ‘urban sprawl’ becomes a real concern for local, state and federal governments as new suburbs take shape across the outer edges of most major cities. The ‘recession we had to have’ strikes at the beginning of the decade, causing people to explore alternative investments to traditional share markets, including real estate. Of course, negative gearing legislation introduced in 1985 makes housing all the more appealing.
- Enter the 21st century and the Australian landscape begins to change drastically, as the world becomes increasingly accessible. Our fortunes start to shift, as we are progressively tied to the Asian market due to ongoing demand for Aussie resources and the US starts to lose its foothold as the world powerhouse. Employment moves further from the manufacturing and industrial sectors, to an emphasis on University education and climbing the corporate ladder.
Of course there’s a lot more social and political context we haven’t even touched on here, but the result of these and other demographic shifts throughout our somewhat brief history is a notable change in the ‘average’ household makeup we see today.
In the last ten years alone, the average Australian household has shrunk from 4.2 to 2.6 residents. Exerting their influence to affect such a dramatic turnaround, from traditional nuclear families to one or two person households, are:
- our ageing population – all those baby boomers who are in the midst of retiring and downsizing.
- Career focused singles and couples choosing to work longer and delay starting a family until later in life.
- A growing number of divorcees, creating smaller, single parent households.
On the horizon
Given the remarkably rapid rise of smaller household sizes in Australia over recent years, it’s safe to say that this trend will most likely continue for some time to come. Particularly given our ageing population.
Then of course there’s the question as to where we will put all of the new arrivals we have coming to our shores – many of whom originate from countries where apartment living and smaller homes are the cultural ‘norm’.
Planning policy from state and local governments is already starting to favour medium to higher density development in favour of urban sprawl, even in outer suburbs where once detached dwellings on large blocks were standard fare.
All of these factors point to one scenario – a new owner-occupier and tenant is undeniably taking shape in Australia and they:
- Love being close to the action and employment opportunities afforded by our major cities.
- Want lifestyle and convenience in terms of established infrastructure.
- Are more accustomed to and/or prefer smaller, easier to maintain accommodation with modern amenity.
As a property investor, this information is important because it allows you to carefully think about asset selection in terms of the type of property and location that will still be desirable and therefore, of value to your portfolio, in twenty to thirty years time.
Something tells me it won’t be that large brick house in the outer suburbs on a sizeable block of land. The Great Australian Dream is downsizing, so don’t discount a well-appointed inner city apartment in a small, boutique block when you plan your next purchase.