2021 to 2027.
Mark that in your calendar as the next period likely to see a spending wave supportive of Australian housing market growth, according to demographic projections.
Australia’s significant drop in first homebuyers has been universally attributed to the high cost of property relative to wages, but it may also reflect population trends.
A centring of skilled migration in the 21-30 age bracket has led to a relative underrepresentation of 31 to 38 years, notes Allen Wargent Property Buyers director Pete Wargent, and that is the bracket which encompasses the typical first homebuyer age of around 31 to 34.
“It is not until around 2021 that the number of potential first homebuyers reaches a critical mass which might be considered compelling, with the number of 31 to 38 year olds in particular mushrooming to a total of more than 3.1 million,” says Wargent. That’s up from only 2.6 million in 2014.
The research also identifies a relative dip in the number of executives, senior managers and business owners commonly aged from around 45 to 55. That is significant as while first homebuyers mostly impact entry level, prices, it is the middle working years that are the heaviest spenders in the housing market.
“The demographic pyramid does not present too kindly in respect of either cohort at the current time … and nor is it likely to do so for some years,” Wargent says.
The forecast comes against the backdrop of Deutsche Bank’s UK-based strategists assessment that global markets, stocks, bonds and housing are all at peak valuations relative to history.
“When aggregated, current levels are higher on average across the three asset classes than they were back in 2007/08 and certainly higher than in 2000,” Deutsche’s “Long-Term Asset Return Study” of 15 countries going back 200 years found.
On the supply side in Australia, 2015 will likely prove to be the market peak for dwelling starts, but dwelling completions will remain elevated for the next few years.
Wargent predicts that in combination with slowing population growth and an erosion of yields, this will eventually bring the current growth cycle to its end.
“Over the near term there could easily be a relatively weak period ahead for housing markets as dwelling completions overtake demand, before a potentially strong rebound running broadly between 2021 and 2027,” he concludes.