By Guest Blogger, Pete Wargent,
Next Level Wealth
Changing living trends
Changing demographics driven by higher immigration, lower birth rates, more divorces, and longer life expectancy are resulting in a rising level of single person households across Australia.
This has some profound implications for our housing markets to cater for more affordable properties to house this growing demographic.
For one thing, we simply need to construct more dwellings than was previously the case!
There are a number of reasons for the change, and correspondingly, a number of different implications for the housing market.
As incomes increase, especially for females in the workforce - and as societal norms have changed with regards to marriage and relationships - more people are opting to live in lone households, while the biggest cohort of retirees is now comprised of seniors.
Let’s delve into it a little below…
How many, and when?
How many single persons households are there in Australia? It’s hard to say, for sure.
The 2021 Census showed that 26 per cent of Australian households comprised of a single person up from 18 per cent in 1981.
Household sizes have been falling for a long time, from around 4½ persons per household in 1900, to around just 2½ during the pandemic period.
There may just have been a slight increase to around 2.6 recently, as students and new arrivals bunch up into share-houses again, post-pandemic.
As of September 2024, there were approximately 11¼ million dwellings in Australia - a figure that’s expected to grow by up to 1.2 million over the next 5 years – to 12½ million and beyond.
That suggests to me that we might see around 3¼ million Aussies living alone by the end of this decade.
While we don’t know the exact figures for today, we can clearly see that the number of single-person households today will be both significant, and growing.
Diverse needs for singles
What do single person households want and need in terms of housing requirements?
While it is possible to live in exceedingly small spaces with beds that fold away, most single person households want a separate bedroom, a kitchen area, somewhere to be able to work from home, and for many, ideally a parking space.
This might mean at least a 40 square metre unit, in an ideal world.
Overall, most lone person households will focus primarily on the convenience of location, walkability, and a sense of local community. After all, if you’re living alone, you will most likely want to live close to your work, extended family, transport, or key amenities.
In the previous property construction cycle in Australia, we saw a record proliferation of units constructed, driven by an unprecedented lift in high-rise construction across Greater Sydney, Melbourne, and Brisbane, as well some regional locations such as the Gold Coast.
Part of the driver for this was offshore investment from Chinese landlords.
However, in this market cycle, to date at least, foreign investors have largely been absent, arguably due to the stamp duty surcharges in place for non-resident buyers.
As such, high-rise approvals are running at only around ¼ of where they were at the previous cycle peaks.
Although some apartment projects are currently profitable for developers – including premium priced projects, such as those with ocean views, or expensive units for downsizing retirees – the average unit project in suburbia does not offer the required returns to justify the risks.
Some 3,000 developers in Australia have fallen into insolvency over the past year, a record high reflecting the steepling construction costs over the past four years and higher interest rates to boot.
Impacts of rising proportion of lone households
What will be the impact of rising proportion of single person households on demand for smaller properties? And are we building enough of this housing type?
For the moment, the answer is definitely not.
However, in every property cycle there appears to be a housing shortage which can’t be tackled, but then the dynamics shift, and construction takes off again.
As interest rates fall in 2025, and as unit prices rise in Sydney, Melbourne, and Brisbane, we’ll likely see a sizeable rebound in approvals for units and apartments, which will begin to hit the market from 2027 onwards.
Interest rate expectations for 2025
Property investment strategies for singles
Would it be a smart strategy to consider investing in this type of housing if there is higher demand coming from divorcees and other unable to afford to buy smaller properties?
There may be.
In particular, investors seeking a higher yield might target this demographic, including for short-stay accommodation or Airbnb offerings in some coastal locations, for example.
There are some potential risks with this strategy, however.
Lenders are often far less comfortable about providing finance for small units of under 40 square metres, for example, and there is a risk that the market becomes saturated with low-quality apartments as the cycle moves on over the next 2-3 years.
Ideally, those targeting the single-person household demographic should look towards boutique unit blocks in leafy, supply-constrained areas.
Aim for solidly built and well-established apartments with owner-occupier appeal, and ideally with some genuine point of scarcity (such as a water or district view, for example).
A generic 1-bedroom unit in a large development may not perform quite so well.
It’s worth remembering that a professional couple might have twice the earning and borrowing power as a single person, so this could be a potential handbrake on prices and rents for single income households.
Pete Wargent
AllenWargent Property
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