Household Mergers & Acquisitions: Digging up the Demographics
The effects of the current coronavirus (COVID-19) pandemic on our country’s economy are obvious enough. Retailers and restaurants have closed, staff have been stood down en masse, the Aussie dollar and our stock markets are plummeting – but there are some other, perhaps more subtle ways in which financial downturn changes our lives.
For example, birth rates. “In the lead up to 2008, birth rates were rising very strongly and hit a peak of two births per woman,” tells social researcher Mark McCrindle, one of our country’s leaders in tracking emerging issues and researching social trends. “When the global financial crisis (GFC) hit, that figure almost immediately dropped back to its late 1990s average of 1.7. Similarly, the average age of mothers spiked from 30.6 years to 31.4 following the GFC.”
One of the key contributing factors to this – on top of the fact that a financial crunch makes people less reluctant to start families – is people staying with their parents later in life because they cannot afford a place of their own. “People therefore move through those markers of adulthood later – coupling up, marriage, children, mortgages – it’s all delayed in uncertain economic times,” explains McCrindle. “And what that’s led to in living arrangements is an increase, for the first time in a century, of the number of people per household.”
One hundred years ago, Australia had an average of 4.5 people per household. Fast forward and a century of economic growth and consistent housing construction has reduced that figure to just 2.5. However, after the GFC, it rose for the first time in a century up to 2.6. “This isn’t because there have been more babies per household – because there hasn’t. It’s because adult kids are either not leaving home or are returning back home,” says McCrindle. And the reason? McCrindle points to two chief reasons – flat wages growth and the ever-increasing price of housing.
Given the current economic climate surrounding the coronavirus crisis, McCrindle suggests that figure could go as high as 2.7 in the coming months, which isn’t as small an increase as it sounds. “It’s actually significant because family sizes are declining as well as the fertility rate so that figure isn’t going up with larger families, it counters the trend,” he further explains. “To have numbers go up when all of the external factors [suggest otherwise] shows how focused we are on bunkering down with others at this time.”
Economic recovery is slower than a downfall, but we should gradually see the number of people per dwelling drop again. However, that’s dependent upon a few factors. “Firstly there’s economic confidence,” says McCrindle. “There’s a lot of stimulus activity going on which is great, but it does come back to that sentiment and also if people feel confidence – that’s when they move out of home; that’s when they take on a lease or take out a mortgage.
“And confidence also comes when people see that jobs become more widely available, when they have security around their employment tenure and when they have an increased earning capacity.”
McCrindle also suggests that the nature of the current financial downturn being a pandemic and forcing people to stay home will rekindle young people’s desire to own their own home, rather than renting or otherwise living without much stability. “For a while it’s been the generation that were happy to invest in the share market or other equities or options, but suddenly a place that you own will see a premium placed upon it when all of this passes,” he says. “Safe as houses, as they say, particularly in uncertain times, and I think the next generation who perhaps haven’t been tuned into that will start to recognise the value of it much more.”
McCrindle also highlights that while this current crisis will have an inevitable impact on the market, the latent demand brought on by the sudden prioritisation of homes should lead to a rebound in property prices. “There won’t be as much overseas demand which led to price rises last time,” he adds. “It will be an owner-occupier demand and I think that provides for a more stable property market.”
For the moment, Australians are staying at home, both to slow the spread of coronavirus as well as to avoid paying rent or mortgages they can’t yet afford yet. But looking ahead, we’ll see a return to a healthy housing market with plenty of owner-occupier demand.