Are we using our housing stock efficiently?

The NSW Productivity Commission has warned in a new housing paper that Sydney is losing some 7,000 people aged 30 to 40 a year. “Sydney is at risk of becoming a city with no grandchildren if we don’t meaningfully address the housing crisis”. The paper found that between 2016 and 2021, Sydney lost twice as many people aged 30 to 40 as it gained. 35,000 came to Sydney, but 70,000 left. It also found that while Sydney has among the highest average wages in Australia, over recent years it has consistently lost population to other states and regional NSW. Approximately two out of every three departures are from the working-age population – that is, those aged between 25 and 64, it’s not only ‘grey nomads’ who leave Sydney.

Solve Property Group was asked to consider on the back of this housing paper, is there a disparity in dwelling sizes and household demographics? Here is a snapshot of our insights.

Escalation of Disparity in Dwelling Sizes and Household Demographics

A range of social and economic changes have led to a decline in household sizes across much of Australia. The demand/supply situation has been caused by a variety of factors, including a lack of housing, increased immigration, and macroeconomic factors such as interest rates.

Australia's housing stock, predominantly constructed during a period of time marked by larger families, confronts a disjunction as contemporary households diminish in size. Notably, out of 140,000+ single-person households in Greater Sydney, more than 75% of the single-person households live in detached residences of three or more bedrooms. Further, nearly 40% of detached houses with three bedrooms or more accommodate households with one or two residents only.

The dilemma amplifies when assessing the apartment market in Greater Sydney. In 2021, the ABS Census data indicates that there were more than 22,000 households with four or more residents living in two bedrooms or fewer, which is increased by more than 12,000 households over the past two intercensal periods (2011-21).

Nationally, it is observed that a substantial proportion of dwellings featuring three or more bedrooms accommodate single or dual-occupancy occupants. This inefficient allocation of housing stock exerts upward pressure on house prices, forcing working families to access detached houses in outer suburbs distant from employment markets.

On the other side of the market, these small households present a ready market for strategically located housing in regions of high amenity with good access to retail and key services. This paradigm shift may also set the stage for the downsizing of elderly residents to apartments, thereby facilitating the migration of working families and alleviating the strain on property values.

A comprehensive understanding of these trends is imperative to construct a future housing market that is both balanced and sustainable.

To discuss these insights further, or to receive the data for the major capital city markets, please reach out to gordon.yoon@solveproperty.com.au

NSW Government Media Release: https://www.nsw.gov.au/media-releases/sydney-at-risk-of-becoming-a-city-no-grandchildren-%E2%80%93-productivity-commission-report-finds