Now we opt for the high life
The great Australian dream of home ownership is changing form as more Australians turn to high-rise living.
The latest research by industry analysts IBISWorld shows fewer Australians are buying their own home and the homes they are buying are getting smaller. IBISWorld analyst Tim Stephen says there is a trend towards higher density living as housing becomes less affordable.
"We expect this trend to continue as more people sacrifice size for lifestyle," he says. "Our research shows more Australians want to live in the city - close to entertainment, work and education - but because space is at a premium, more people are choosing to live in apartments as opposed to houses.
"Home ownership is the cornerstone of the great Australian dream, providing financial and emotional security for those who can afford to take the plunge. But fewer people can afford to buy their own home and unless the governments do something about it, affordability will become more of an issue."
And while the house construction market is picking up pace this year, it is expected to slow again.
"The house construction industry's revenue is forecast at $39.5 billion for 2012-13, an increase of 1.3 per cent on the previous year," says Stephen. "New housing investment is gradually recovering under the pressure of pent-up demand for accommodation and lower mortgage interest rates. However, this growth is predicted to slow as interest rates rise and housing becomes less affordable."
High-density housing is growing at a faster rate than the traditional, detached housing sector, he says. "Apartment and townhouse construction is worth $15.1 billion for 2012-13, an increase of 5 per cent on the previous year. More Australians are buying higher density dwellings as inner-city detached housing becomes less affordable.
"Over the next five years, we forecast the apartment and townhouse construction industry to grow at 4.5 per cent compared with just 2.4 per cent in the detached house construction industry."
Stephen says the number of people per dwelling is also dropping.
"The long-term trend for the number of people per dwelling is declining and this is also having an affect on the size of properties people are buying. They don't need as much space."
Supply is another issue. "As the supply of houses has been constrained over the past decade, prices have increased and more people are being forced out of the market," he says. "They are either renting or buying something smaller such as an apartment.
"Land which is being released for new housing is typically quite a distance from the CBD, and sometimes the infrastructure lags behind. A lot of people prefer to buy a smaller house or apartment that is closer to the city and therefore closer to employment, education and shopping."
He says Australians are getting used to living with less space. "Australian cities are becoming more like European and North American cities and people are getting used to higher density living."
"If you look at the rate of construction of new apartment buildings over the past decade, it has certainly outgrown construction of new houses."
Frequently Asked Questions about this Article…
IBISWorld research and analyst Tim Stephen say affordability and lifestyle are driving the shift to high-rise living. More people want to live close to work, education and entertainment, and because inner-city detached housing is less affordable many are choosing smaller apartments or townhouses instead of houses.
The article reports fewer Australians are buying their own homes and that affordability is worsening. Tim Stephen warns that unless governments address the issue, affordability will become more of a problem, pushing more people to rent or buy smaller properties.
According to IBISWorld, apartment and townhouse construction is growing faster than detached house construction. For 2012–13 apartment and townhouse construction was worth $15.1 billion (up 5%), while house construction revenue was forecast at $39.5 billion (up 1.3%). Over the next five years IBISWorld forecasts apartment and townhouse construction to grow about 4.5% versus 2.4% for detached houses.
The long-term decline in people per dwelling means households are getting smaller, so buyers and renters often need less space. For investors, this trend can translate into stronger demand for smaller apartments and townhouses compared with large detached homes.
Yes. The article notes new housing investment has been recovering due to pent-up demand and lower mortgage rates, but growth is expected to slow as interest rates rise and housing becomes less affordable, which could dampen house construction activity.
Supply has been constrained over the past decade, pushing prices up and forcing some buyers out of the market. Land released for new housing is often far from the CBD and can lack infrastructure, so many people prefer smaller homes or apartments closer to the city for access to jobs, education and shopping.
The article highlights faster growth in the apartment and townhouse construction sector and a sustained shift toward higher-density living. Everyday investors should note rising demand for inner-city apartments and townhouses, though the piece stops short of giving investment advice and stresses affordability and interest-rate risks.
Yes—the article says Australians are getting used to living with less space and higher-density cities, similar to European and North American urban patterns. That cultural shift supports ongoing demand for apartments and townhouses in inner-city areas.
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