Dr Ameeta Jain is the Course Director of undergraduate programs at Deakin University. Ameeta is a passionate educator with more than 15 years of experience in lecturing in property, economics and finance units. She has led the development and enhancement of various courses. Ameeta's research centres around issues of sustainability and resilience in regions as well as property markets. She has obtained government funding for projects aligned with the United Nations Sustainable Development Goals as well as industry funding to evaluate the resilience of housing markets. She has published in highly ranked national and international peer-reviewed journals as well as media pieces.
The 2021 Census data released in June 2022 reveals that for the first time Millennials (25-39 years old) have caught up with the Baby Boomers (55-74 years old) in terms of numbers. In comparison with the 2011 census, Baby Boomers decreased from 25.4% to 21.5% of the population whereas Millennials increased from 20.4% to 21.5%. This decline in the importance of the Baby Boomer generation as the dominant force in the residential real estate market is likely to change the demand profile for housing across Australia.
Natural attrition due to death, and increased age of the Baby Boomers means that firstly there is likely to be an increase in the sale of deceased real estates over time. Secondly, demographers theorise and hope that Baby Boomers will increasingly be looking at rightsizing (smaller house size but similar budget) where the empty nesters consider moving inner city to a smaller house with a holiday house thrown into the mix. At this time, there is no financial or other incentive for Baby Boomers to sell their family homes and move. On the contrary, there are downsides to selling a valuable family home, with both financial and non-financial penalties. These include loss of friends, environment and neighbourhood, sale proceeds reducing aged pension and other benefits, and loss of amenities. None of these non-financial considerations has been addressed by government policy. Given that Baby Boomers own more than half of the residential real estate in Australia, appropriate policy measures to wean them from their family homes and to move to more appropriate (in terms of size) housing are required. It would be presumptuous to assume that Baby Boomers comprise a homogenous group of well-off retirees. Like in other generations, this cohort comprises many who will continue to work for myriads of reasons well past 65, some do not even own their houses, others are a part of the sandwich generation, caring for their parents from the silent interwar generation and their own children/grandchildren. These confounding factors, along with many others, keep housing markets operating inefficiently in the eyes of theorists and policy makers.
Opportunity for Millennials: maybe not
On the face of it, the power of increased numbers is supporting the Millennial generation in their quest for increasing home ownership. Prior studies demonstrated that the Millennial generation wants their housing to reflect their changing lifestyle, ethos and values: large master bedroom, en-suites, modern interiors, energy efficiency, bigger kitchens, low maintenance living and location all at the right price. This is different from the requirements of the Baby Boomer generation previously: smaller houses with bigger yards, dated interiors and exteriors. This is reflected in the current housing stock in Australia held by Baby Boomers. However, when Baby Boomers rightsize, they may well be competing with Millennials for the same properties.
Some studies have shown that Millennials are increasingly looking at innovative methods for getting their foot in the property market: buying affordable housing to rent out and renting in their preferred area (rentvesting); buying as a part of a property syndicate; or buying with friends and family.
Where to from here?
In the ideal world property markets would be completely efficient and follow ideal theoretical constructs, ensuring that Baby Boomers would downsize as soon as society regards that they should, and the next generation move into established family housing. However, reality is very different. There needs to be a policy shift by federal and state governments recognising that the Baby Boomer generation is unlikely to give up their hard-earned wealth (despite all arguments to the contrary). Unless it can be ensured that the Baby Boomers will not be financially worse off by rightsizing or downsizing, there is unlikely to be any significant increase in Millennials owning more properties. Even in the presence of appropriate policy measures, non-financial factors preventing Baby Boomers from giving up their family homes will prevent a complete handover of existing housing stock from the Baby Boomers to the Millennials. This complex problem requires governments to not just provide Baby Boomers with the option to rightsize/downsize without financial penalty, at the same time developing innovative policies and programs to help millennials to buy into the residential property market.