Bigger family homes, more couples without children and high housing costs are just some of the trends that businesses need to follow from an in-depth report into Australian homes released by the Australian Bureau of Statistics.
CommSec chief economist Craig James was one of the few economist to pick over the 112 page report, officially entitled Housing and Occupancy Costs 2007-08 and published late last week, but says the data should prove invaluable to businesses wanting to understand how Australian homes are changing.
“Any business, particular in that retail space, has got to understand what the trends are in terms of people’s outgoings,” James says.
One of his major findings from the report is that Australians are now more exposed to rate rises than they were a decade ago. The data shows 35% of households have a mortgage, up from around 30% a decade ago, while the proportion people owning their homes has slumped from 40% to 33% over the decade.
That means every rate rise will have an effect on consumer’s thinking.
“We’ve seen a lot of conservatism from consumers in the last few years – whether that’s the GFC or rate rises is yet to be seen,” James says.
“But businesses need to understand who their clients are and how they will be affected by these rate rises.”
Some of the other trends that could affect your business include:
Bigger houses, bigger families
While debate continues to rage about Australia’s housing supply (or lack of it) the data from the ABS shows that Australians are making the most of what they’ve got, with the average home increasing in size from 3.07 bedrooms, up from 3.0 bedrooms five years ago and 2.94 bedrooms back in 1996/97. There was also noticeable lift in the average number of people in each household over the past two years, lifting from 2.51 people to 2.56 people.
Lesson: The increasing size of the Australian family home suggests businesses need to cater to larger families (perhaps through bulk packaging or value packs) and be aware that consumers remain focused on adding value to their family home.
Housing costs rising
The sensitivity of consumers to interest rate rises and increases in other housing costs should not be underestimated. Over the last decade, the housing costs of those with a mortgage jumped 41%. Renters have also been hit hard – 24.1% of renters had housing costs more than 30% of their income, while only 22.1% of homeowners were in the same category.
Lesson: Bargain hunting by consumers is not something related to the GFC – consumers are being squeezed by housing costs and this will only get worse as rates rise. Businesses must concentrate on value and realise the pressure for discounts will remain high.
Apartment living grows
Over the past two years the proportion of people living in apartments has jumped from 10.6% to 12.9%.
Lesson: While consumer goods companies need to cater to the family with the larger-size house and household, they also need to be able to cater for the smaller end of the market with products suited for use in the confined space of a flat.
The kids move on
One of the biggest trends is that 26.5% of all families were couples only, slightly ahead of couples with dependent children (26.4% of the population). This reflects the trend towards couples having children later and particularly the ageing of the population, with the number of empty-nesters likely to keep growing.
Lesson: We are starting to see an increasing number of companies (particularly in the area of financial services and insurance) cater to that empty-nester market. This group remains reasonably cashed up and very active, but companies need to be wary of lumping them with anything to do with senior citizens.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
