After a decade of price boom and busts, Australia’s property market will see big changes in the 2020s.
Interest rates will remain low
Interest rates are likely to remain at very low levels in the 2020s. The decline in interest rates in recent decades was a global phenomenon and are likely to continue into the 2020’s. This is mainly due to high levels of debt, increasing costs of oil production, lower retail spending as baby boomers age, and slower economic growth.
Strong population growth will continue, but may be more spread out than in the 2010s
Rapid population growth will continue in the 2020s, which will underpin ongoing strong demand for housing.
Australia’s population is growing at a faster rate than almost all advanced economies. In the 2010s, Australia’s average annual population growth was 1.6 per cent and is currently around 26 million. Faster population growth in the 2010s was mainly due to higher immigration. The government is forecasting that strong population growth will continue in the next few years.
Population growth was concentrated in Melbourne and surrounding regions, Sydney, and south-east Queensland in the 2010s.
Public transport will become more important
Proximity to public transport in Australia’s major capital cities will become more important in the 2020s as cities expand and traffic congestion worsens. Car ownership may also start to fall as more people favour public transport and other forms of transport.
Traffic congestion has risen and is expected to get worse, despite significant investment in new roads. Infrastructure Australia forecast that the annual cost of road congestion will increase from $19 billion in 2016 to $39 billion in 2031.
Australia has very high rates of car ownership due to our high incomes, sprawling cities and vast distances in regional areas.
More medium-density housing and larger apartments will be built in the 2020s
More medium-density housing and larger, family-friendly apartments will be built in the 2020s. These larger apartments will have three or four bedrooms and also more communal areas such as gardens or playgrounds.
When people consider the trade-offs between price, size and location, many say they would like to live in a medium-density dwelling, such as a townhouse or terrace, or an apartment, in a suburb closer to the city rather than a detached home in an outer suburb. But there is a substantial undersupply of medium-density housing and apartments within Australia’s major capital cities.
With Australian cities growing and congestion increasing, demand for medium-density housing in established suburbs will keep rising.
New homes will be more energy efficient and better suited to a warmer climate
More energy-efficient dwellings that are better suited to the warming climate will be built in the coming decade.
Consumers will demand more energy-efficient, well-designed and smartly-oriented buildings.
Governments will also likely change building standards. A new National Construction Code was adopted in May 2019, but energy-efficiency requirements were not changed, with the “6 star” minimum standard for standalone homes remaining despite the warming climate (see graph). Building standards may also be changed in response to the apartment defects and flammable cladding disasters and the 2019 bushfires.
Tenants will become a more powerful political group
A growing number of renters will make tenants a more powerful political constituency, which will probably result in tenancy laws swinging more in favour of renters.
The proportion of households that are renting from private landlords has been trending up for decades. At the end of 1994, 18.4 per cent of households rented privately. By 2017, this had increased to 27.1 per cent. If the trend continues in the 2020s, 31.5 per cent of households will be renting privately by 2030.
The increase in renters is most pronounced among young and middle-aged households (see table). Rising house prices are probably the major factor driving this trend, but social changes, such as later marriage and further study, are also playing a part.
The number of tenants will likely increase by more than the number of new landlords. It’s likely many new rental properties will be owned by existing landlords. Institutional landlords, such as “build-to-rent” developments, are also likely to own a growing share of the rental stock.
A stronger political voice for renters will likely result in changes to tenancy laws. Changes could include renters getting more security of tenure (such as through the removal of no-grounds evictions and longer notice periods), renters being able to make modifications to their homes and dwellings needing to meet higher energy-efficiency standards.
Ageing Baby Boomers will need new housing
The housing needs of ageing Baby Boomers will change Australia’s housing stock.
The oldest Boomers will be in their mid-80s at the end of the decade, with the youngest around retirement age. Many older Boomers will need more residential aged care by the end of the 2020s. The Aged Care Financing Authority estimates that 76,000 new residential aged care places will be needed over the decade from 2017 to meet growing demand.
In addition, new dwellings that enable seniors to live independently for longer will need to be built, as well as existing homes renovated. These new dwellings could be townhouses and units with few stairs or elevators, accessible bathrooms and low-maintenance gardens. Planning rules will need to change to enable these types of dwellings to be built near where retirees live as there is a strong desire among retirees to “age in place”.
Original article published by Trent Wiltshire at domain.com.au