Sydney Stand Alone Homes, 2006 - 2016

In Sydney, building approvals for stand-alone homes continued its upward trend in September 2013. In a city where 56.2% of housing stock is stand-alone, this steadypipeline of detached housing has, and continues to be, driven by a combination of business and consumer sentiment, changesin land-use planning and policy, but also demography - specifically the changing life cycle stages of demographic segments.

Demography is not particularly understood in mainstream society with the market research term 'demographics' acting as a surrogate to explain all things people. Despite a wealth of anecdotal and empirical information in circulation about demographics and residential property, the patterns and geographical compositions of what define and shape our communities are not really understood or commonly available.

Slicing the population into 7 demographic groups,research findings reveal the changing residential composition of how people choose to live. Looking specifically at stand-alone homes between September 2006 and September 2013, 131,000 additional people in Sydney live in this style of residence. Strong growth was common to the 55-64 and 65+ segments (see chart 1), but given the life cycle stage of these segments, their growth can be largely attributed to 'ageing in place'.

Chart 1: Demographic composition of persons living in stand-alone homes, 2006 - 2016

Source: Paul M. Ross, 2013

In the 7 years to September 2013, persons aged 35-44 (Gen X) grew 0.15%. Gen Y (aged 25-34) fared even worse with -1.4% growthover this period. On the basis of their position in the life cycle, the younger segment generally don't aspire, nor are they in a position to afford a stand-alone home, but using the same rule of thumb, a growing proportion of Gen X are actively entering, or trying to enter, this market. However, the net effect, as presented in chart 1, illustrates that their absorption rate into stand-alone homes is negligible. Why is this? Simply there is a lack of stand-alone housing stock evenly spread across Sydney; where affordable homes are available, in outer and peri-urban Sydney,there is either poor connectivity to employment and amenity hubs and/or a lack of sufficient infrastructure -a reality which doesn't resonate with all sub-segments of Gen X. The expectation that baby boomers will exit their inner and middle ring stand-alone homes en masse is supply side wishful thinking; even if they do, there is the affordability conundrum facing Gen X ' their predecessors have ridden a very long capital gains wave with current house values far outweighing, or stretching, the servicing capacity of many incumbent Gen X's.

The compositional and geographical implications of this scenario moving forward presents a stand-alone housing pattern of ageing communities across the inner and middle rings, and younger communities in the outer ring and across peri-urban localities. On the basis of these challenges, Gen X is choosing a different path with a growing number choosing to live in multi-dwelling residences across the city's inner and middle ring. Following the events, and aftershocks of the GFC, a downsizing baby boomer market has not been the spectacle anticipated - especially by Gen X! Staying put, remaining in employment, and even supporting their children, and their children's children, are baby boomer behaviourskeeping many aspiring Gen X'ers out of stand-alone housing communities across Sydney's inner and middle ring.

These gatekeeper effect show ever are expected to thaw over the forecast period. In the 3 years to September 2016, 8% growth is anticipated across the 35-44 segment, but it is the 45-54 segment however where more significant growth is expected to take place (see chart 1). With Gen X representing a quarter of the 45-54 segment by 2016, the 19% growth forecast can in part be attributed to them, demonstrating thatolder Gen X'ers are beginning to have some compositional influence on the stand-alone housing market of Sydney (chart 1).Review of chart 2 supports this trend, with waning annualised growth rates anticipated for 55-64 year olds and to a lesser extent, the 65+ segment. Segments 35-44 and 45-54 meanwhile present an expected improvement in the 3 years to September 2016.

Chart 2: Annualised growth rates by demographic segments living in stand-alone homes, 2006 - 2016

The anecdotal expectation of thousands of detached stand-alone homes changing hands from the baby boomers to Gen X and Gen Y over the next decade seems at this juncture far-fetched. However, there is evidence to suggest that the baby boom generation is downsizing with $500 billion worth of detached residential assets anticipated to change hands across Australia, (50,000 - 100,000 homes, assuming an average property value between $500,000 and $1,000,000) over the next decade.

In the absence of detailed modelling and analysis, it is difficult to understand not only their downsizing patterns and intentions, but the changing patterns associated with tenure such as owned outright, under mortgage, and rented, and their changing compositional relationship with all age segments and where these patterns are taking place.

Our next blog article will investigate this reality of this $500 billion, its patterns, and distributions over time and space. Looking specifically at stand-alone housing in Sydney, the analysis will chronicle the baby boomers impact on stand-alone housing tenure patterns and what contribution Sydney boomers have made historically and are likely to make over the next decade.

Date posted: 2014-01-14 | posted by: paulr

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