As the number of households is due to increase by 4.3 million over the next 25 years, the demographics of this increase will be key.
There is a difference in having an ageing population compared to having significant immigration.
Ageing populations tend to weigh on economic growth and stock market prices for a significant amount of time. An ageing population that wants to be risk averse and save for their retirement isn’t going to be investing in stocks.
Quite clearly, there has been a change in society with the increase of up to 65 per cent of Australians living alone. That’s mainly due to family size and the problem of an ageing population. Couples are having fewer children and having them later in life, preferring to concentrate on climbing the career ladder prior to settling down.
This decrease of the typical family model has increased single-person living, which could therefore have a knock-on affect to personal spending. Living alone can be more expensive. Bills aren’t split between parties, spending on entertainment is increased and there are no shared healthcare or insurance plans.
The increase in single living could affect disposable income negatively, which would mean less available cash to purchase or invest in the stock market. Therefore, although households are increasing as single-person living is also increasing, this won’t necessarily have a positive effect on the stock market.
Couple-only families are projected to experience the largest increase of all types of families over the next 25 years and are expected to rise by up to 64 per cent from 2011 to reach up to 3.8 million families in 2036.
This increase of households should create further revenue streams for new builds, but it will also continue to push prices higher in major cities. The idea of macroprudential policies to try to curb house prices has not been ruled out by the RBA.