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Upsize or down?

Will your next home be a house in the suburbs or an inner-city apartment?

Apartment living has boomed in the past decade, but as young families ditch the apartment for a house, demand is likely to equalise, according to a report released this month by industry analyst and economic forecaster, BIS Shrapnel.

The report, entitled ‘Emerging Trends in Residential Market Demand’ suggests that the magnitude of the shift to apartment living could slow over the next decade, as the 20-to-34 year olds – who have driven apartment occupancy over the last 10 years – begin to move into their next stage in life.

The increasing propensity to live in multi-unit dwellings across all age groups will continue to drive solid demand over the next decade, but the overall movement will stabilise, the report shows.

The trend will be tempered by changes to the age profile of the population, as the recent rapid growth in 20-to-34 year olds begins to translate to an acceleration of population of those in their late 30s and into their 40s, and with it some improvement in demand for new houses.

As a result, the long-term movement towards medium and high density dwellings will begin to stabilise.

BIS Shrapnel Senior Manager Angie Zigomanis remarked that 20-to-34 year olds have accounted for an increased share of population growth over the past decade, reflecting both the children of the Baby Boomer generation moving into this age group, as well as the age profile of Australia’s higher overseas migration in this period.

In comparison, growth in the 35-to-49 year old age cohort has been weak but is now rising.

“The growth in the 20-to-34 year old group has fuelled occupancy of units and apartments in the inner and middle suburbs of the capital cities over the past decade, mainly as renters,” Mr Zigomanis said.

“However, as this group increasingly moves into their late 30s and early 40s in the coming decade and enters their next life stage, the question is whether they will still live in medium and high density dwellings.”

The 2011 Census reveals that nationally around 63 per cent of households with a household head aged 20-to-34 years old lived in detached houses, which increased to 80 per cent of households where the household head is aged 35-to-49.

Families with children dominate the 35-49 year age group, comprising 71 per cent of households, compared with just 39 per cent of younger households.

“Assuming the current 20-to-34 year olds in multi unit dwellings move on to separate houses, as has already been evident among 35-to-49 year old households, then this will translate to higher demand for new detached houses,” Zigomanis said.

“This would provide some relief for land developers, builders and building materials suppliers who mainly service the detached house market and have found the going tough in recent years – although the challenge will be for all stakeholders to ensure that the greenfield land market will be able to meet this potential increase in demand”, he added.

But will they choose the house in the suburbs? We continue the report next week….