Of mystics and statistics, a residential recovery is on the way: Michael Matusik

Small things; incidental stuff; anecdotal evidence is what I like to look for.  Data is nice too, but too much data bores.  Stories, tell-tale signs, glimpses of change often mean much more.  

Several things in recent weeks have convinced me that things have now changed.  A residential recovery is on its way. 

It often is a news item – something that really should only get local attention – like calling a marginal, unknown female politician “sexy” – that gets a life of its own and announces that a race is underway.  

One such article was about a new micro-apartment development in Melbourne.  No big deal.  But when we get invited by several media outlets to comment then maybe the mindset has shifted.  The number of online replies and the amount of social media reply supports this muse.

You can see a similar trend with the “Sydney boom or not” conversation over recent weeks.  

Another, more localised indicator is golf.  Golf?  

See, I haven’t played a game in over 18 months.  Lost interest.  Work got in the way.  Mind elsewhere.  

Most with whom I played, felt the same way.  But in the last month or so, the invites for an early or late round are starting to come.  Hmmm, are things looking up?  

Finally, I like to go to auctions.  I hang in the back of the crowd.  I like to play ‘nearest the pin’ – see, golf is never really that far away.  I am often pretty close – within a few per cent of the final price – but of late I have been way, way off – missing by a wide mark & always on the low side.  Last weekend I was close to six figures off the mark.  Six figures!  

Just as well I am getting invited to play some golf, as my auction performance of late is quite humiliating.  

Some facts & figures  

Re this talk of recovery – if the micro-apartment & Sydney boom media attention are bellwethers - I fear we could get more disconnected than usual from reality.  

So in this spirit it is timely to outline some truths about the Australian housing market.  

Here goes.  And yes, this list does include data.  I hope you don’t get too bored!  

*     One in every seven Australian households owns one single residential investment property.  Just 480,000 households own two rental properties; with 162,000 or a paltry 2% of Australian households owning three or more investment homes.  These volumes have changed little over the last two decades or so.  

So everyone isn’t buying an investment property.  Whilst it will be an investor-led recovery, there isn’t a massive need to rush.  

*     Three-quarters of our housing is detached.  One in eight homes is attached (duplex or townhouse for example).  The same proportion applies to apartments.  1% of our homes are caravans, boats or similar.  These percentages have also not changed in decades.  

We are suburban.  Most live in a suburban setting.  Some suburbs might be going through gentrification, which is good for the locals and investors too.  But not everyone is moving downtown or into apartments.  In fact, only a limited number actually do.  

*     Household size is increasing, not in decline.  And whilst there are smaller apartments downtown, overall the size of our new homes is growing.  Just 4% of Australia’s homes have one-bedroom and 15% have two-bedrooms.  This mix has also not changed in decades.  

What has changed in recent years the number of three and four-plus bedroom dwellings.  Today 42% of our dwellings have three-bedrooms (it was 48% 10 years ago) and 39% of our housing stock today contains four or more bedrooms.  Up from 33% in 2001.  

*     Whilst, statistically, half of Australia’s households either live alone or as a couple without children at home, very few people actually live alone or even in groups of two.  The census tells us that just one in ten people live alone; one-quarter of us live in groups of two; 40% in groups of three or four and another quarter in groups of five or more people.  

We are tribal.  Density must be offset.  Living independently is quite different from living alone.  

*     One in ten of our private dwellings is occupied.  They aren’t all apartments on the Gold Coast, in Noosa or batches at Bateman’s Bay.  Many are suburban homes.  At present, a quarter of our population growth comes from overseas.  Many of these are returning expats, who are increasingly attracted back due to the lower Australian dollar.  Asian investors will often buy before migrating and they too often don’t rent out their properties.  So some (maybe many, who knows?) migrants will move back into their empty homes.  

Whilst higher population growth leads to expanding housing demand, there isn’t always a direct mathematical relationship.  

*     There’s a lot of research which indicates that on average, travellers operate within a fixed time budget.  It seems to be around 30 minutes (one way) for the typical work commute in Australia.  We are prepared to travel further for leisure.  

When given a reduced travel time (e.g. better infrastructure) commuters tend on average to spend the time saving on travelling to more distant but better jobs, or as is more often the case, to a better residential property/location.  

So an improvement in access to places of work doesn’t always mean better price growth.  It doesn’t hurt.  But its multiplier impact is limited.  Ironically, new infrastructure projects often help property values further afield than most advocate.  

Note I said “recovery” and not “boom”.  A plus 20% lift in values over the next three or four years isn’t a boom.  Only if prices rise that much within 12 to 18 months would the “boom” title be justified.

Michael Matusik is the founder of Matusik Property Insights, which has helped over 550 new residential projects come to fruition.  
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