We’re going to have 4.3 million more households in Australia by 2036!
The ABS released its updated Household and Family Projections data for 2011 to 2036.
It is fairly well known – and widely reported – that the population of Australia is projected to soar across that time horizon, by more than 10 million heads or 45 percent from 22.3 million to around 32.4 million.
For the reasons I explained here, even these projections appear likely to be the low side, and this latest statistical release also hints at a similar conclusion, highlighting a projected “rising median age” i.e. younger immigrants are likely to be welcomed with open arms by future governments in order to lower the median age, while simultaneously adding to economic growth and improving the participation rate.
What is less well appreciated is that a projected explosion in the number of lone households is set to place the property markets of our four largest capital cities under intense duress, as I’ll detail through a handful of key charts below.
Lone household explosion
The latest projections showed that while the number of family households will show the greatest increase in absolute terms, the number of lone households in Australia is set to skyrocket over the 25 year time horizon considered by an extraordinary 65 percent.
In numerical terms, while only 2.1 million Australians live alone today, we can expect to see up to 3.4 million lone households by 2036.
Meanwhile we may also expect to see a massive 46 percent increase in childless couples – up to 3.8 million households – and the number of single parent families is set to increase dramatically from 1.1 million to 1.8 million (most of them continuing to be headed by females).
In turn, this will decrease the average household size towards just ~2.5 persons per household, from ~3.5 persons per household in 1960.
What this means for property markets
What does this mean in terms of our property markets?
In short, we’ll need equivalently more dwellings than one might intuitively expect to house the projected expansion of the population.
This is set to add extreme pressure to some housing markets, though as we will see below, not all of them.
Why will this demographic shift occur?
Why will such a demographic shift happen?
It is partly related to the ageing of the population, as more of us live for longer after the death of a partner.
However, more younger Aussies will opt to live alone too.
The answer is also inextricably linked to blooming household wealth.
Although average household wealth as a percentage of average annual household disposable income has yet to recapture in full the heady glories of yesteryear, the latest figures show that aggregate household wealth in Australia is comfortably breaking record highs.
With Australian share market indices breaking fresh 7 year highs and median dwelling prices rising in Australia’s three most populous conurbations, I am certain that new household wealth records will be broken across the next two quarters of data too.
In a country without punitive inheritance or death taxes, more Australians will be able to afford to live alone than has historically been the case, and the latest projections show that more will choose to do so.
Projected household growth
The net result of this is that the number of households is projected to explode from 8.4 million in 2011 to some 12.7 million by 2036 – a colossal increase of some 4.3 million.
The key equation is that as the average household size declines to ~2.5 persons per household, an expected 45 percent increase in the population over the 25 year time horizon considered will require a massive 51 percent increase in the number of households.
This is an arresting thought when we stop to consider how the skylines of our four largest and most congested capital cities might look.
To put this growth rate in the number of households in perspective, below we can compare figures with England, Scotland, New Zealand and Japan.
Summarily, when compared to other developed economies Australia’s heavily urbanised property markets will have enormous exertion placed upon them by the forthcoming expansion in the population.
Households growth – capital cities versus regions
It is important, though, to note that most of Australia’s property markets will not be unduly impacted. null
Indeed, the latest projections show that regional population growth as well as the growth in the number of households in regional New South Wales, Victoria, South Australia, Western Australia, Northern Territory, the Australian Capital Territory and regional Tasmania is set to taper off to negligible levels over time…and surprisingly quickly in most cases too.
In fact, if regional employment growth continues at its current snail-like pace, the growth in the number of regional households in these states and territories could become immaterial much sooner than even this absent the requisite business and infrastructure investment.
As the above chart shows, only one state will show a dramatic increase in the size of its regional centres, that being the sunshine state of Queensland.
By the middle of the century we know that the population of Brisbane is expected to mushroom to 4.2 million.
But Gold Coast-Tweed (+102 percent), Mackay (+130 percent) Townsville (+93 percent), Rockhampton (+79 percent) and Cairns (+55 percent) will also be key growth cities.
However, over the next couple of decades the real pressure will be on the four largest cities with Sydney (+820,000), Melbourne (+938,000), Brisbane (+519,00) and Perth (+698,000) all expected to see an explosion in the number of households by 2036.
The gradients of the bars representing those four cities in the chart below tell their own story.
On the other hand the above chart also shows why Adelaide is far less likely to experience a sustained property boom – there is insufficient upwards pressure on the market with population growth at a more sedate 1 percent per annum or 13,000 persons, which can be more comfortably absorbed by land rezoning.
Hobart too is only expected to see a shallow increase in its number of households, although the “X factor” for the less populous Tasmania could be record Chinese visitors and tourism spend in the Apple Isle – perhaps one to watch either interest.