What type of dwelling will be in continuous strong demand in the future?
As the housing markets in major cities throughout Australia progress and develop, it is crucial to recognize that the past constructions in terms of dwelling types and locations may not align with the future requirements for housing.
Charter Keck Kramer explored the demand for various types of dwellings for Baby Boomers and the demand this large cohort will create as they move into the next stage of their lives.
Who are the Baby Boomers?
The Baby Boomers, born between 1946 and 1964, entered the Australian housing market during a time when the predominant vision of the Great Australian Dream involved owning a detached house on a quarter-acre block of land.
Numerous detached dwellings were constructed or purchased in what was considered the inner, middle, and outer rings of the capital cities at that time.
However, with the subsequent population growth, many capital cities have expanded their urban areas to accommodate the increasing population, and these expanded regions now largely constitute the "middle" rings of the Australian capital cities.
So, what's next for them?
As a significant number of Baby Boomers are entering retirement, it becomes evident from statistics that many of them have already paid off their detached houses, and their children have moved out of the family home.
These retirees are inclined to stay in their familiar neighbourhoods and age in place.
While they may possess substantial assets in the form of their homes, they often face limited cash flow since they have stopped working full-time.
In the coming decade, these Baby Boomer households will need to make important lifestyle decisions regarding their current housing arrangements.
These decisions will be influenced by their financial circumstances and their plans for retirement living.
It is expected that many Baby Boomers will seek alternative housing options that better cater to their evolving needs in the later stages of life.
The choice of dwelling types, locations, and price points will play a crucial role in their decision-making process.
They could:
- remain in their current home,
- access or leverage the equity in their existing detached houses to support their retirement, and
- transition to a dwelling that better aligns with their changing lifestyle requirements.
Dwelling opportunities for Baby Boomers
According to Charter Keck Kramer, there are several opportunities that have begun to emerge and will continue to gain momentum as Baby Boomers retire:
1. Build to Sell (BTS) owner-occupier apartments
Baby Boomers could find well-constructed, owner-occupied apartments in small to medium-sized developments highly appealing due to the advantages they offer.
These apartments provide a low-maintenance lifestyle, allowing residents to lock up and leave without concerns about property upkeep.
They are likely to prioritize security, often featuring accessible designs that eliminate the need for stairs, promoting ease of mobility for older residents.
Among the various apartment options available, the most sought-after product types among Baby Boomers include:
- 2-bedroom/2-bathroom,
- 3-bedroom, and
- 4-bedroom layouts
These layouts provide the necessary space for accommodating family members, welcoming guests, and enjoying quality time with grandchildren.
By having ample room, these households can maintain a sense of comfort and flexibility within their living spaces.
2. Townhouses
Baby Boomers are also drawn to well-designed townhouses that offer private open spaces.
These townhouses have gained popularity among buyers who appreciate the inclusion of small private gardens, allowing them to keep pets or cultivate vegetable gardens.
In specific high-priced areas of Australia, some townhouses even come equipped with lifts, providing convenience and accessibility.
Alternatively, there is an untapped opportunity in the market to cater to Baby Boomers by delivering single-level townhouses that eliminate the need for stairs.
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Recognizing the preferences of this demographic, these single-level townhouses address the desire for easy accessibility and mobility, filling a gap in the market and catering to the specific needs of Baby Boomers.
3. Build to Rent (BTR) apartments
As the benefits of Build-to-Rent (BTR) housing become more apparent, it is expected that a portion of the Baby Boomer market will embrace this housing option.
Specifically, key segments that may be attracted to BTR include widowers, divorcees, or individuals who prefer not to transition into traditional retirement communities.
These individuals seek the advantages of residing in a secure community with abundant resident amenities and a strong sense of community.
BTR provides an appealing value proposition for Baby Boomers looking for a comfortable and supported living environment outside the realm of conventional retirement options.
4. Retirement living
Retirement living is expected to remain appealing to a specific and small segment of the Baby Boomer market due to the tailored dwellings and service offerings provided by retirement/lifestyle communities.
These communities are designed to accommodate the lifestyles and preferences of individuals entering retirement age.
With a range of amenities and services available, retirement communities offer an attractive option for Baby Boomers seeking a living environment that caters specifically to their needs during this stage of life.
Opportunities for the Government
Currently, due to the lack of suitable and affordable alternative housing options in the same areas, many Baby Boomers residing in the middle rings of Australia's capital cities are forced to remain in their existing detached homes (aging in place).
This situation is primarily a consequence of restrictive planning regulations that limit the supply of diverse and affordable housing, thereby driving up house prices and negatively impacting the livability of neighbourhoods and cities.
This outcome not only dissatisfies many Baby Boomers but also hinders other households and age groups from entering or staying in these highly desirable housing markets.
It is crucial for the government to adopt a proactive, bold, and long-term approach to address this issue.
Essential measures include amending planning regulations to allow for greater housing density, such as townhouses, build-to-sell (BTS) apartments, and build-to-rent (BTR) apartments.
Moreover, changes to various taxes and charges, including the removal of inefficient taxes like stamp duty or land transfer duty, are necessary to facilitate the cost-effective transition of Baby Boomers to different types of housing.
Government authorities need to recognize that the decisions made today will have a lasting impact on future housing markets.
Various studies indicate that changes in planning and zoning take several housing market cycles (7-10 years) to have a significant impact, while changes to tax policies that facilitate new housing production can take 2-4 years to be fully effective.
Furthermore, there is a need for public education regarding medium and higher-density housing, dispelling the notion that all forms of density are negative.
By facilitating additional and diverse housing options in the middle rings of capital cities, the government can enable Baby Boomers to age-inappropriate dwellings while also allowing them to reside close to their children and grandchildren who may opt for more affordable apartments or townhouses in the same location.
In summary, it is imperative that the government takes proactive steps to address the housing challenges faced by Baby Boomers and future generations.
By implementing changes in planning regulations, and tax policies, and promoting public awareness, we can create more suitable, affordable, and livable housing options for all.
Opportunities for developers and financiers
in their report, Charter Keck Kramer (CKK) recommend that developers and financiers are strongly encouraged to examine the potential within these areas by exploring market data and identifying the substantial untapped demand.
They believe that there a considerable opportunity exists for capturing this demand if the appropriate housing products are introduced at the right prices.
Furthermore, it is essential for the development and finance industries to persevere in their pursuit of innovative housing solutions and financing models that align with the preferences, lifestyle requirements, and financial circumstances of the Baby Boomer market segment.
By continuously adapting to their needs, CKK believe these industries can effectively address the evolving demands of this demographic and offer housing options that cater to their unique requirements.
