Its true. We don’t like living with each other as much.
For a few years I’ve been writing about a particular puzzle in the rental market.
When the borders shut and immigration went to zero, everyone expected this to put slack in the rental market.
But the opposite happened. The number of available rental properties plummeted, and as a result, rents sky-rocketed.
What on earth was going on?
Well, we got figures from the latest Census last week, and what is shows is that there’s been a noticeable drop in the average number of people per home. That is, there’s less of us living together:
The size of Australian households has declined over the past five years, a shift that may have accelerated during the pandemic, increasing demand for housing and sending rents sky-high even as overseas migration fell sharply.
Census data released on Tuesday also reveals that formation of single-person households has significantly out-paced the creation of one-bedroom homes, a disconnect which shows housing construction is out of step with needs, according to some analysts.
In rounded numbers, the average number of people comprising each household has fallen from 2.6 to 2.5 people. Although the shift appears marginal, it could equate to nearly 200,000 homes.
“It explains the rental crisis we’ve got on our hands right now,” SQM Research founder Louis Christopher said.
Variation in household size – leading to the formation of more households – emerges as the mystery variable that goes some way toward explaining the puzzling fact that housing rents are soaring again after initially plummeting in some areas early in the pandemic as students and tourists left the country and migration came to a halt.
“We can safely say now that during COVID-19 people were looking to live with less people around them,” said Mr Christopher.
Nationally the vacancy rate fell to 1 per cent in May, on SQM Research’s tally earlier this month. Rents in Sydney have risen by 17.5 per cent over the past 12 months, with Brisbane up by 18.6 per cent over the same period and Melbourne up 14.8 per cent.
The census data reveals that three-person and larger households have declined as a proportion of households. While couples have remained steady, single-person households have significantly increased, from 24.42 per cent of households in 2016 to 25.56 per cent of households in 2021.
At the same time, the proportion of four-bedroom or more homes has increased by more than two percentage points to 34.8 per cent, racing ahead of a modest uptick in single-bedroom homes.
The need for an extra 200,000 homes is not insignificant. Given we only build about 60,000 new homes a year, we’re talking about adding demand for over 3-years of housing into the market all at once.
No wonder rents sky-rocketed.
At the same time, there’s a growing mismatch between what people want (increasingly single-person accommodation) and what the market delivers (large family homes.)
Hmmmm. Seems like there’s an opportunity here for someone.
JG.