When the GFC kicked off in October 2007, retirement village sales stopped overnight as potential customers refused to drop prices on the family home, stalling their move into the village.
The experts say we can expect housing prices to drop by 20% thanks to increasing interest rates. This may occur across the country but I don’t believe it will happen where village customers are located.
In simple terms, village customers have large homes on bigger blocks that suit families, in middle ring Metro suburbs or established regional suburbs. The families looking to buy these homes, looking for schools, close to family and close to work, will be in their 30s and 40s and established.
Their employment will be secure, and they will have all that cash that they didn’t spend on holidays or new cars over the last 30 months.
And commissioning a new house or even renovations is not on the cards because of increasing costs and lack of skilled labour. The graph above shows that in 2022 the forecast is 133,000 new home completions, down from 232,000 in 2016. Supply is not keeping up with demand.
Every sector is desperate for new immigrants to join their workforce. The floodgate will open over the next 18 to 24 months with demand matching 2016 – but will they be able to afford new homes, given rising costs. See the chart below.
New immigrants will struggle to buy accommodation, or even rent as those prices are increasing as well.
In summary, we have diminished stock being built, cashed up buyers accepting that the fastest way to get a new home in a desirable suburb is to buy an existing home and retirement village customers willing to sell but also willing to wait a month or two for the right price.
As my colleague, Jake Nelson writes in today’s The SOURCE newsletter, just 23,000 village homes become available each year. With COVID-19 identifying the insecurity of ageing people in the community, it is fair to say that demand does exceed supply.
