Anyone looking at generations of Australians and seeking to pick trends in the housing market should look not just at the traditional baby boomer generation but also at the current generation of 25 to 34-year-olds, a leading researcher says.

BIS Shrapnel senior manager, residential property Angie Zigomanis acknowledged that by number, growth in baby boomer generation households will outstrip that of all other age brackets over the next decade, but argued that many within this age group were largely settled apart from a degree of modest downsizing with regard to their housing requirements.

By contrast, their children – a younger generation born during the 1980s and early 1990s – were creating a secondary population bulge. Despite being smaller in number compared with the baby boomers, this group would probably have a larger impact from the perspective of dwelling market transactions over the next decade as they enter the stage of having children and thus experience changes in their housing requirements.

“Most of the talk is around the baby boomers and the effect this generation will have on the market,” Zigomanis said. “Really that group has been driving the market up until now – a generation ago as first home buyers then as upgraders.”

“Now, their kids are getting older and they are starting to approach retirement age. Many of them have built up networks in areas they are in and would like to stay in those areas. So while from a demographic perspective they are like the watermelon that is working its way through the snake, they are at a point now where they are not likely to change dwellings for some time.

“Coming in behind them (however), there is this Gen Y group who are children of the baby boomers. They are another demographic bulge so they are like a little cantaloupe behind the watermelon – smaller in size but they are reaching a life stage where dwellings are a big part of their life cycle.”

Zigomanis’ comments follow an article he published in The Urban Developer last October about the impact of Generation Y in the Sydney market specifically. In that piece, he pointed out that in Sydney alone, the ranks of 35 to 44-year-olds within the population would swell by almost 50,000. Their transition from the 25 to 34-year-old age bracket to the next age bracket would potentially create a substantial shift within the market as 35 to 44 year-olds-are historically more likely than their younger counterparts to be living in a household with children, to be living in a separate house and to be living in owner occupied housing.

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Still, he does not believe housing preferences of this generation are likely to be uniform or that Generation Y’s as housing market participants will be particularly concentrated in any one type of location. Rather, he says, choices amongst this generation will reflect trade-offs associated with location, affordability and size of dwelling. Some may want to move out to the suburbs to be closer to parents as they themselves have children and others may wish to live within zones of reputable public schools or close to private schools of their preference.

Zigomanis also does not believe preferences of Gen Y will differ markedly from earlier generations in terms of aspects such as style and layout. Instead, he says dwellings which feature open plan layouts and which maximise natural light will remain popular.

Notwithstanding the historic trend for a growing preference toward owner occupied housing as people grow older, however, where Zigomanis does feel members of Gen Y are making an impact right now is in the rental and investment markets. Considerations related to career and general life flexibility have seen this generation less averse to renting as opposed to buying and to the idea of purchasing an investment property as opposed to an owner-occupied property as their first property owned.

“I think a lot of Gen Y’s are happy to be renting while they are still footloose and fancy-free,” he said. “They always want the option of going overseas for work or taking up a job interstate. From that perspective, they probably prefer to be renting rather than being tied down to a mortgage somewhere.”

“Often those who are renting will have an investment property as a foot in the door in the market as something they may not necessarily want to live in but can cash out of down the track in terms of buying the next home.”

Finally, one interesting phenomenon which Zigomanis feels may happen going forward is that Gen Y may end up competing with their parents’ generation for medium density and semi-detached forms of housing such as townhouses.

“More so than previous generations, having been used to living in smaller dwellings, and probably more likely to have less children than the previous generation, you probably will see more gen Y owner occupier demand for apartments and townhouses and relative to where it was previously more so in established areas as opposed to  the outer suburbs,” he said.

“I suppose the thing you might find down the track is that you’ve got Gen Y type looking for these types of properties as well as baby boomers looking for these same types of properties and competing with baby boomers for these types of properties.”