24 April, 2024
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Home Sweet Home: The Evolving Dynamics of Home Ownership and the Australian Property Market


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Many buy their dream home intending to settle long-term; yet, there’s a growing trend of people adopting a more enduring perspective.

In the short run, how long people keep their properties is often tied to how the real estate market is doing, when that market is going down, those who’ve owned their homes for a while might decide to sell. This is because they’ve held onto their properties for a longer time and could still make a profit despite the market dip. On the flip side, when home values are going up, even those who’ve owned for a shorter time might be tempted to sell because they see a chance to make more money.

The Australian Bureau of Statistics (ABS) data reinforces this trend. In New South Wales (NSW), the proportion of two-person family households residing in homes with four or more bedrooms went up between 2016 and 2021. The 2021 census reveals that most two-person households (67%) were in standalone houses, and 40% of them were in houses with four or more bedrooms.

Baby boomers are taking over our three and four bedroom homes, firmly stating they prefer to stay put until the end rather than downsizing.

The rise in remote work has also heightened the desire for larger homes, with homeowners realizing the importance of having a dedicated office space. This quest for more space has become an additional motivation for people to move to the outskirts of the city.

The trend of purchasing homes farther from central business districts (CBDs) is likely influenced by two main factors: affordability challenges in inner-city living and the natural expansion of urban areas. High costs associated with living in the city center and the continuous outward growth of cities have probably contributed to the preference for properties situated at a greater distance from CBDs. The average distance to the CBD reached its peak in the year leading to April 2021, coinciding with the uncertainties of COVID-19 lockdowns and the peak of remote working adoption.

Affordability constraints on inner city
living… have likely contributed to the
trend towards buying further away from CBDs

The widespread adoption of remote work, especially among knowledge workers whose jobs involve dealing with ideas and information, has been a significant trend during the pandemic. This shift in work dynamics might have influenced decisions to buy homes located further from central business districts (CBDs) or even in regional areas of Australia.

Data from the Australian Bureau of Statistics (ABS) census indicates that in 2022, over a third of individuals relocating from capital cities to regional areas were relatively young, falling between the ages of 25 and 44. In contrast, only 10% of the movers were the traditional retirees aged 65 and above who typically make a sea change or tree change.

The property market in 2023 was marked by a noticeable shortage of property listings, pointing to the extended tenure of homes. Listing volumes across capital city markets were up to 30% lower in 2023 compared to the preceding five-year period.

Government stimulus during the pandemic, combined with record-low interest rates, contributed to the most significant inflationary environment in 32 years. The cost of building a home surged by as much as 20% by September 2022, propelled by factors such as a shortage of labor and materials, rising shipping costs, and a backlog of projects.

Influenced prices as significantly as interest rates have. Low interest rates translate to a relatively low ongoing mortgage debt. Conversely, today’s higher interest rates are restrictive for various buyers.

Interest rates began to increase from historically low levels in May 2022, and by June 2023, the lending capacity for the average double-income family had decreased by $250,000. This reduction in borrowing capacity for families translates to decline in demand for products from large-scale developers. Consequently, this drop in demand leads to a decrease in the commencement of construction projects.

The Australian Bureau of Statistics (ABS) documented a substantial 21.9% decline in dwelling commencements in the 12 months leading up to December 2022. This trend persisted in 2023, accompanied by a decrease in the value of building work.

Increased immigration has added pressure to housing stock levels.

Despite the challenges, low listing numbers play a role in supporting property prices because buyers contend for limited options. Anticipations are that the increase in home values will prompt a surge in new listings. This, in turn, might encourage more homeowners to consider finding a new forever home.

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