Sure, some behaviours, values, and preferences differ markedly between the generations. Other things stay mostly the same. For example, every generation goes through predictable life stages at roughly the same time.
To keep this big topic manageable for a humble column like this, we will focus on how the big demographic shifts, how life-cycles, shape our housing market today.
People move home at roughly the same stages in their lives. Census data from 2016 shows this beautifully. Don’t worry about the data being five years old, the trends were almost the same in 2006.
Anyone in the property sector would be interested to know when people are moving, when they are looking for new housing. This chart shows us what share of the population (by age) moved home within the last 12 months.
About 17 per cent of all people living in Australia move house in any given year. At a population of 25 million, that translates to about 4.3 million people. No wonder there is a high demand for all type of moving-related services.
Year after year removalists help one in six Australians move their stuff from one place to the next. Every move has real estate agents, selling, renting, advertising and inspecting homes at both ends of the move (old home, new home). Most of those moves will be followed by a trip to IKEA & Co too.
Moving is good for the retail sector in general
The younger your kids, the more likely you are to have moved home in the last year. Young parents look for larger dwellings as their kids get older. At age 14, kids arrive at the most stable phase of their youth, as only 13 per cent will have moved in the last year. Parents try to provide stability to kids in their most unstable developmental phase – probably a good move (no pun intended).
Starting at age 18 the most mobile phase of the lifecycle kicks in and peaks at age 23, when 37 per cent of Australians will have moved within the last year.
Young adults move around a lot before they enter the family-formation stage and look to settle down. They leave the parental home for their tertiary studies, move into a series of shabby share houses, and eventually progress into their first apartment with partners.
Once Australians enter permanent relationships, moving becomes a less frequent activity and the dream of home ownership emerges.
The older we get, the more likely we are to stay at one place. At age 77 only 5 per cent of Australians will have moved within the last year. Starting at 77, we tend to move more frequently again. That’s when downsizing starts.
This chart also hints at the fact that the downsizing trend in Australia is smaller than the volume of articles on the topic suggests. Australians don’t downsize at scale for financial reasons. Cash in on the family home, buy a smaller place, throw the difference into your super, go on Rhine River cruises and frolic on the golf course.
That’s a fun cliche but it’s not what our retirees end up doing. Only once the family home becomes a nuisance to maintain, or even a physical hazard, are Australians willing to downsize in large numbers.
As we move through the life-cycle, we are also more likely to become homeowners. The chart above shows the share of the population that are living in a rented property.
Of our newborn babies, 40 per cent live in rentals. As kids age their parents do what they can to become homeowners, and by age 17 only 28 per cent are living in rented properties.
Once young people leave the parental home, the renting phase of the life-cycle begins, peaks at 28 and only reaches 28 per cent at age 44 again (when their own kids are about 17). The likelihood of being a renter declines from 28 all the way down to 92. After that, the likelihood of living in a care home goes up.
Millennials, of course, delayed home ownership quite a bit. This was partly because they partnered up later in life, delayed first child birth, and partly because housing is becoming more unaffordable every year. That said, the renting and moving life-cycles stay roughly the same across the generations.
If we overlay the renting curve from the last chart on our current population profile, we can make a few big picture predictions about future housing trends.
In the chart the Millennial generation is clearly visibly. They are the big bulge of the population aged in their early 20s into the late 30s. For most of the last decade the biggest generation in Australia (that’s the Millennials we are talking about) has been in the renting phase of the life-cycle. Now they are increasingly moving out of that phase into their homeowner years.
That trend was inevitable but the desire for home ownership was only increased by lockdowns and the working-from-home trend. Massive numbers of Millennials wanting to buy family-sized homes was a main reason why house prices went up even during the pandemic.
The rentals the Millennials leave behind will struggle to find occupants as the next cohort of renters, Gen Z, is much smaller than the Millennial generation.
The big Baby Boomer cohort is also still a decade and more away from downsizing at scale, meaning their homes won’t became available any time soon for Millennials to buy.
That’s how big picture life-cycle trends shape the world around us and influence property prices.
Ah, isn’t demographic data great fun to look at!