Being involved with the NRAS (National Rental Affordability Scheme) has enabled me to access some pretty interesting research on housing. In particular the affordability of housing and the types of dwellings we require for now and in the future.
In the government’s studies into housing for the NRAS, they discovered a massive shortage of 1, 2 and 5 bedroom accommodation. Considering that just about everyone I speak to about investing, first home owning, upgrading and downsizing requires a 3 or 4 bed dwelling, this is not surprising.
After learning about these shortages I started to talk to people about this – most couldn’t and/or can’t conceive that we may have to live in smaller dwellings in the future.
I then decided to do some research for myself and discovered that, in Australia, there are currently about 1.8m people living alone and that is predicted to double in the next 15 years. Approximately 35% of the population live as couples and this will increase to 52% over the next 15 years. How does this portion of the population reside? Answer = probably in dwellings too large for them.
When you put the above stats into perspective along with the research undertaken by the government, you have to wonder why developers and investors aren’t catering for this market/demographic – and also – with the number of people per dwelling declining rapidly what kind of housing crisis might we face in 10 years time?
Add to the equation that the costs of running a household are increasing rapidly – will we end up with an over supply of 3 & 4 bed dwellings that no one can afford to buy, rent or run? An interesting question, and also an issue we must start thinking about.
The results of the RP Data-Rismark Home Value Index for June showed that the unit market has outperformed houses over the last 12 months and during the last five years.
Historically, houses have enjoyed a much more rapid appreciation in value than the growth recorded by units. There are a number of reasons for this more rapid level of growth: greater demand for houses, diminishing availability of development land, higher quality of stock and design available for houses rather than units and the great Australian dream to own a house rather than a unit, amongst a number of other reasons.
Despite these factors, over the last five years units have recorded average annual value growth of 7.4% compared to 7.1% for houses. However, the results suggest that the superior performance of units compared to houses is quite a new phenomenon as over the last 10 years the average annual value growth of houses (9.9%) has well and truly outperformed units (8.0%).
Perhaps with time we will be able to swallow the pill of smaller blocks and dwellings for residing and investing in and also embrace the new Australian dream of home ownership – Can I afford one?!