Generation Y may have been Generation Boom for the apartment market over the past 15 years, but according to new research they're more likely to be leading a house-and-land surge over the next decade.
BIS Oxford Economics has forecast big changes in the residential demands of ageing Gen Y buyers will lead to slower growth for the apartment market heading into the 2020s.
The researcher says that over the past 15 years, the rapid growth of 20 to 34-year-olds has been buoyed by strong net migration levels to Australia, stoking demand inner-city apartment living.
While demand for apartments will continue to grow, the BIS senior manager of residential property, Angie Zigomanis, says Generation Y buyers are more likely to be looking for alternative options as they start raising families.
"Over the next decade, this surge in 20 to 34-year-olds will translate to an acceleration in household growth of those in their late 30s and early 40s," says Zigomanis.
"By this stage, Generation Y will be increasingly coupling up and moving into the family-forming stage of life, and many will be looking to purchase a dwelling, most likely larger dwellings such as detached houses or townhouses, or family-friendly apartments."
The BIS findings are based on 2016 Census statistics that show that 76 per cent of households led by adults aged between 35 and 49 years lived in freestanding homes, compared to 59 per cent of households led by 20 to 34-year-olds. They were also more likely to have a mortgage rather than rent their home.
"If Generation Y follows the trend of the previous generation and eschews renting and favour larger dwellings as they enter the family-forming age of life, then this will support a decade-long boom in demand for new houses and land in the new housing estates on the outskirts of Australia's major cities and affordable major regional centres," says Zigomanis.
"Pressure is also likely to be maintained on house prices in established areas, as competition remains strong for Generation Y families looking to remain in the established areas where they have already been living and renting in smaller apartments."
BIS has found that affordability remains the big stumbling block in the equation, with many younger families opting to stay in an apartment or townhouse longer rather than pushing into cheaper areas and extending their commute to work.
This is expected to underpin continued demand for high-density living, but Zigomanis says developers will need to shift their thinking away from standard investment stock if they are to meet this market.
"To meet the potential growing number of Generation Y families in established areas, multi-unit dwellings will need to be designed to be more appropriate to family life, offering more space, both indoor and some outdoor, or located adjacent to public outdoor spaces," he says.
"In particular, new apartment designs will need to change to provide more appropriate product for Generation Y families."
BIS forecasts that this trend could leave the current investor-style apartment out in the cold, particularly as the upcoming Gen Z demographic is the same size as Gen Y. This means that population growth for 20 to 34-year-olds, which is traditionally the renter market, will slow considerably over the next decade.
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