What do today’s demographics mean for property management?

With almost no one travelling and migrating to Australia, we’re facing a demographic change that’s big for the rental market. But when the recession really starts to bite, unemployment figures could have an even greater impact with falling incomes locking even more people out of the property market as owners. So is it a case of short term pain and long term gain for property management? Brock and Kathryn from Kolmeo unpack these demographic factors and discuss what to watch out for as the ripple effects are felt by real estate businesses and their customers.

Our cities transformed

In most of our state capitals we’re seeing some immediate and profound impacts on the property and business landscape. Some of this is driven by the interstate and city to regional migration we’ve been talking about recently. But two of the industries really taking this immigration crackdown on the chin are tourism and education. Even though their activities mostly take place within our borders, these sectors are among our biggest exports.

Tourism is most definitely in hibernation after the double whammy of bush fires and travel restrictions. And the loss of so many international students is really transforming our cities. It’s not just the sight of whole buildings like UniLodge looking emptier than a high rise in a zombie apocalypse movie. The many small retailers and food vendors who’ve had to close their doors definitely adds to the ghost town vibe. The disappearance of these international communities and the services they relied on is certainly a problem for local economies. Add to this the fact that the many people working from home no longer feel the need to live cityside, and we start to see why rental vacancy rates in cities are climbing.

But what we won’t see for a while is how society as a whole is changed by immigration slowing to a trickle. Keeping our population growing by welcoming new residents from overseas isn’t just about topping up the skills we need for economic prosperity. We’re extra grateful to live in a country where the net population growth from migration is usually in healthy double figures. This isn’t just good for productivity, it also has a lot to do with enriching our culture and society.

Getting into property

On the plus side for our population, a lot of Aussie expats are reconsidering the country where they choose to live. And when they return home, they’re generally looking to rent, at least in the first instance. While these potential tenants aren’t likely to be in the market for the budget properties that uni students have left vacant, they could create a healthy demand for urban rentals in the mid to high price range.

This is based on an assumption that most of these returning travellers have reached a certain stage and financial status in life, allowing them to pay a little more for a roof over their head. And people are more aware than ever of their home being their castle this year, as they’ve been spending a lot more time in it. Does this suggest we’ll see even more people doing all they can to get a foot on the property ladder?

As far as we can tell, movements into and out of the property market haven’t really changed that much. With interest rates having been so low for a long time, first home buyers are struggling to save the deposit they need in a market where prices are, generally speaking, quite resilient. So it’s still the case that some will be ready to buy while others won’t.

A smarter solution

In our view, the outlook for renting here in Australia is, overall, pretty positive. Sure, we’re having a bit of an unsettled period just now, with ups and downs in different locations as people have some new reasons to think on where they want to be living. But we reckon demand is holding up well at both the low and high ends of the market. The fact that people need somewhere to live while they save their deposit means demand for rentals is looking pretty buoyant for the foreseeable future.

This rental market resilience, along with that deposit factor we mentioned, are two very good reasons why we think rentvesting is still a good alternative to being an owner occupier. First time buyers who get into the market sooner are improving their chances of capturing the capital gains that property has delivered fairly steadily for decades. But choosing to buy in their perfect lifestyle location can keep that goal well out of reach, particularly if prices in that area are rising at a faster rate than their savings.

If buyers embrace rentvesting as a practical alternative to living in the house they own, they get more scope to buy within their budget and perhaps in an area where the metrics make more sense from an investment point of view. By keeping an eye out for rental yield and prospects for growth in market value, buyers get to choose a property and a location that’s a better match for their budget and long-term goals.

Bringing it all together

For some people, particularly those who’ve had to move a lot, renting can come with a degree of insecurity. And it’s true that in other countries living in a few rentals over your lifetime is more common. So it could be argued that rentvesting will really take off if legislation were changed to favour tenants’ rights to stay put on their terms.

But if you know what Kolmeo means and why - it’s the Finnish word for triangle, by the way - you’ll have an idea of where we stand on this. We’re a team that works to support every side of the property management triangle - agency, owner and tenant. So what we’d really like to see from legislative reform is a lot less red tape which can only be a good thing for everyone involved.

More uniform regulations across the country would be a great place to start. As things stand we have acts in each state that all seek to do roughly the same thing, but in a slightly different way. And some of these state-specific regulations add layer upon layer of bureaucracy to something that’s in everyone’s interests to keep simple - bond lodgement and refund is a great example of this.

Kolmeo exists to make life easier for all our users. So we would really like to see legislative changes that lead to more efficient and predictable processes and outcomes. This is a surefire way of supporting a thriving property management market that keeps tenants and owners happy and sees agencies prosper, even if the economy is a little flat for a while.