Meeting the housing needs of a growing population

Sydneys-housing-market-is-standing-out-from-the-pack-at-the-moment_157_91540_0_14101790_300Demand for property comes down to a number of factors, not least of which is population growth. Record low interest rates have their part to play, but a growing population also contributes to rapidly rising demand for property. An ever-expanding population can sometimes create as many issues as it solves – while it stimulates job creation, economic activity and construction work, it can also put a fair bit of pressure on demand for property.

Population boom

The Australian Treasury highlighted some of these issues in its most recent Intergenerational Report for 2015. The report examined a number of cornerstone elements of the Australian economy and how the country can improve to meet the needs of its booming population.

Already, CommBank’s State of the States report for January 2015 indicated that New South Wales’ population is growing at an above average rate. It might have only swelled 1.47 per cent in 2014, but this is still 22.8 per cent above the decade average. Similarly, the Intergenerational report predicts that the country’s population will grow at 1.3 per cent per year, which is slightly less than the rate over the past 40 years – however, at that rate the population will soar to almost 40 billion people by 2055, a staggering rise from the current count of 23.7 million.

Providing shelter

This begs the question of how to provide an adequate supply of housing. The report highlights that each generation has its own set of demands, but Master Builders of Australia said this is an crucial reminder about the importance of residential construction.

CEO Wilhelm Harnisch said that more than 9 million homes will be needed to meet demand over the next 40 years – this is more than twice the number of houses available at the moment.

“The key challenge will be to tackle intergenerational housing affordability in order to preserve home ownership as a fundamental pillar of Australian economic and family life over the next 40 years,” he said.

He pointed out that as lifestyles change, so too will people’s demand for housing. The construction industry therefore needs to be able to respond to the shifting demographics as effectively as possible – and they can’t do this without a little help from state and local governments.

Reducing the number of barriers to new home building is one of the most significant challenges.The Housing Industry Association (HIA) points out that policy reforms, investment in social infrastructure, increasing land supply and speeding up of the building approval process will all help towards this goal.

“Housing is the bedrock on which all other facets of society are built. Without shelter, families and individuals cannot participate in the economy to their full potential,” said HIA Chief Executive Industry Policy and Media, Graham Wolfe.

Ageing gracefully

Australia’s population is expected to undergo a massive demographic shift. Treasurer Joe Hockey pointed out that, in the next 40 years, the number of Australians who are 65 and over will more than double. Seven million people will be over 70, and the country will have one of the longest life expectancies in the world. In fact, the report predicts that there will be more than 300 times the number of Australians aged 100 and over by 2055.

Like all other generations, an older populace has its own set of unique needs. The report emphasises that additional retirement living can help alleviate some of the pressures, but once more, policy is key.

The Retirement Living Council has come up with an interesting solution to the issue. It is advocating for changes to penalties in pension policy, to help pensioners access the funds necessary to downsize. This will ideally give them more choice to move into a retirement facility.

“The benefits of this policy will also be felt in Australia’s property market – particularly in hot spots such as Sydney – where more large, family homes will become available for families and first home buyers as older Australians take up the opportunity to downsize,” said Mary Wood, the Property Council of Australia’s executive director for retirement.

This makes for an interesting predicament for the property market. While a growing population brings up a raft of challenges, there are solutions that could ease some of the pressure.

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