Pseudo housing policies ‘need to die’, demographer warns

Co-founder and director of The Demographics Group, Simon Kuestenmacher, has told Mortgage Business there will be a smaller percentage per age group of Australians able to own a home, as inaffordability in the housing market grows.

Alongside rising interest rates that are contributing to borrowers’ mortgages increasing, demand for larger homes continues to increase as stock dwindles, which was adding to Australia’s affordability crisis, Mr Kuestenmacher said.

“The whole narrative of downsizing is much exaggerated in Australia."

Australia was at a “tipping point” where the ageing population was clinging onto their two to three-bedroom homes, at the same time, Millennials were ‘finally’ ready to upsize, he explained. 

“We have the largest generation to have ever lived in Australia, ‘the Millennials’, leaving small dwellings, wanting big dwellings … and moving to wherever the hell they can afford and find a three and four-bedroom house.

“This desire to live in a large home has gone up like crazy,” saying he expects that to continue for the next 12–13 years.

“That means the competition for family-sized homes is ludicrous. [And] that happened to coincide with the pandemic.”

2030’s ‘delicious’ decade for brokers

Looking ahead, Mr Kuestenmacher anticipates the 2030s will be “by far” the busiest and “most delicious” decade on the Australian property market if you’re a mortgage broker.

“Because what we're seeing by then is, the big baby boomer generation slowly downsizing for two reasons at scale, he explained.

“The first is because the family home becomes a nuisance to manage [or a] physical hazard, and the second one is they're doing the ultimate downsizing… to the little final box.

“That means you have this big cohort of baby boomer properties entering the market all at the same time.”

Thus, there will be a surge of “really nice properties” entering the market, inheritances to be consumed, and the demand waiting there to fill them - creating an opportunity for brokers.

“Somebody needs to negotiate with the bank [and] mortgage brokers are the most likely candidates to do so," Mr Kuestenmacher said.

“If it gets harder and harder to get a mortgage and there's just too complex of a market.

“That means people that know their way around the market will be in high demand.”

Systemic housing policies needed

As the issue of housing affordability grows in Australia and it takes longer and longer for first home buyers to save for a deposit, “systemic policies” were needed to empower Australians into home ownership.

Mr Kuestenmacher rejected policies such as the first home owner grant in having an effect on the housing affordability issues.

“These kinds of pseudo-wannabe solutions need to die. As if the market would know that first home owners now all have $10,000 bucks more — it’s outrageously dumb,” Mr Kuestenmacher said.

But he added there was an “appetite for systemic solutions” applauding the NSW government’s stamp duty reforms, which offer first-time buyers an alternative to stamp duty by paying an annual land tax.

“We’ll need to see whether this turns the needle in any way. But I can only applaud systemic changes,” Mr Kuestenmacher said.

“Another really honest systemic change would be a state-owned housing developer who builds social housing and is expensed key worker accommodation.”

But this requires the state to be the developer in order to build without a profit incentive and keep affordability low, he explained.

In addition, he applauded the federal government’s $5 billion housing Australia Future Fund, as investment opportunities in housing will remain strong.

“There will be the money because you have this [significant] generation of Baby Boomers … the richest generation reaching retirement and you have the relatively wealthy Gen X generation completely moving into what is probably called the de-risking phase of the investment cycle,” he said.

He explained the Baby Boomers and Gen X will begin to ‘de-risk’ investment by moving funds into “safe investments” such as infrastructure and property, encouraging more investments in this space.

[Related: Housing policy needs inter-generational lens: CEDA]