Inner-City Properties Elude Millennials Until 2030s
Millennials will have to wait at least another eight years to get a foothold in inner-city and middle-ring suburb properties, according to a demographer Simon Kuestenmacher.
As we enter a new year, The Urban Developer spoke to Kuestenmacher about mega-trends likely to affect the property market in 2022.
He said after “running the Covid experiment” it was apparent the flight to growth corridors and regional areas had been persistent with the adoption of remote working.
But it was bad news for millennials looking to move closer to city centres.
Millennials locked out of inner-city living
“Even if house prices fall 10 per cent they will only be able to move to middle ring and outer ring suburbs,” Kuestenmacher said.
“It won’t be until 2031 when baby boomers are forced to start downsizing due to poor health that those inner-city suburbs will be unlocked.
“Australians are pretty stubborn, we like to stay in our own homes until we break a hip, and we are rich enough to be able to do this.”
And incentivising downsizing to unlock the tightly-held inner-city property markets was unlikely to work, according to Kuestenmacher.
“On paper it should work, but it doesn’t … we can’t incentivise baby boomers and empty nesters to downsize,” he said.
“But there’s something wrong with this, older people are living very humble lives in these properties worth up to $2.5 million, when they could be making a last big move to a fancy flat somewhere nearby.
“People don’t actually want much, they just want a path to home ownership and then it’s little luxuries, there’s no outrageous dreams. We don’t actually need much to be happy.
“Millennials will continue to move to bigger housing over the next 10 years, I would therefore say that the growth corridors will continue to rise in population."
Young families moved to bigger houses with an office to accommodate homeschooling and working from home as a result of the pandemic.
Growth corridors and regional hubs flourish
Oliver Hume project marketing chief executive Julian Coppini said millennials made up the biggest segment of buyers in Melbourne’s growth corridors with purchasers between the ages of 26 and 40 accounting for 55 per cent of sales in November 2021.
“Buyers aged 33-40 remain the key greenfield buyer age cohort,” he said.
“Although this age segment includes many upgrader and investor purchasers it also, increasingly, includes many first home buyers buying later in life.”
Price increases and affordability issues paired with inflation and tighter lending controls is predicted to create a weakening in the greenfield market next year.
Kuestenmacher said regional cities would also continue to flourish, including Geelong, Ballarat and Bendigo in Victoria. Outside of Victoria, Kuestenmacher said buyers should look at regional centres including Ballina, Toowoomba and Launceston that had growth potential.
“We would really benefit from one or two radicals building high speed trains that connect our regional areas.
“There is not a single politician in this country talking about infrastructure for 20, 30 or even 40 years’ time, it’s all about getting re-elected.
“We should give an overarching body like Infrastructure Australia more power to build in more forward thinking … this is how you change a city.”
▲ Incentivising employees' return to the office with opportunities to connect and collaborate will help to reinvigorate CBDs.
Returning to the office vs killing the office
Working from home had already been growing in popularity, but the pandemic has fast-tracked a more technology-enabled remote working model for many white-collar workers in Australia.
Big and small organisations are weighing up their options, reducing their CBD footprints or moving to more suburban locations as we adjust to a new work-life model in 2022.
Kuestenmacher said many people had moved to bigger properties further away from CBDs to accommodate homeschooling children and working from home. Never have people needed a home office or media room more.
“Businesses are killing the workplace in favour of suburban catch ups with staff who have made significant investments in their home set up, got a new desk, created a zoom room,” Kuestenmacher said.
“Milennial families with young kids that lived in townhouses moved to the urban fringes or regional areas. They needed houses and now they have moved, they’ve made sure their house has a zoom room or an office.
“Working from home and working near home is likely to persist as long as we are well connected and technology enabled.”
Kuestenmacher said it would be hard to drive people back into the CBDs and it would be better to incentivise team catch ups and collaborative sessions. He said it would be about creating opportunities to connect that would lead the move back into offices, while some businesses would operate in a “virtual first” environment.
“Once you turn on immigration then the inner city will fill up again with students and migrants … the CBD will still be the lively place to be. But this will still take years to recover to the level of occupancy before the pandemic,” he said.
Australia's CBD office occupancy rates are starting to lift according to the Property Council of Australia's data. Melbourne occupancy was at about 12 per cent, while Sydney had risen to 23 per cent, and Brisbane was at a robust 63 per cent.
PCA chief executive Ken Morrison said the results were "hearten
“We’ve seen good positive momentum over November but the timing of the Christmas break will put a pause on this as workers take a decent break to recharge after a challenging two years, before returning to work and their offices, after summer,” Morrison said.