“The Bureau of Statistics has made substantial changes to population and household estimates in recent years, suggesting that the number of people per household or dwelling has reversed course,” CommSec’s chief economist, Craig James, says in a report released today.
I thought this was an interesting article. One of my arguments against a property crash in Australia (notwithstanding localised cycles), is that there is a level of pent-up demand of people who just can’t get on the ladder. I know plenty of people in their late 20s and early 30s who would love to own their own home but can’t quite afford it. If prices started to fall, they would be the ones preventing the so-called ‘rush to the exits’.
The ‘kidult’ phenomenon, with kids staying at home much longer, even before renting let alone buying is another example of this pent up demand. It’s not demand that would cause prices to rise (they’d need higher incomes or access to credit to do that) and it’s also demand that only applies at a certain submarket.
This article seems to lend some weight to that, with the ABS confirming the anecdotal evidence. I think there are two ways to look at it:
- The increasing number of people per household reduces the number of dwellings demanded, putting negative pressure on house prices
- The increasing number of people represents the gap between demand from first-time home buyers and the supply of entry level housing. That pent up demand will absorb and supply that comes as a result of prices falling.
It’s important, because it’s really the size of households that determines demand for dwellings. If it’s a cultural/structural shift, then it may have a large negative impact for residential property in Australia. If it’s just people ‘getting by’ by living in an arrangement that’s not ideal for them, it will have a positive impact.
I favour the latter interpretation.