Key takeaways
Population growth will drive demand for affordable housing, favouring greenfield developments on city fringes over costlier medium- or high-density housing.
Baby boomers entering retirement will drive growth in aged care services, creating opportunities for businesses offering premium or tech-driven solutions. Governments will face increasing pressures around healthcare, infrastructure, and intergenerational equity, particularly concerning housing affordability and tax reform.
Millennials are purchasing homes later, causing age-specific ownership rates to decline. As fewer Australians can afford to buy, rental demand will continue to grow, but supply may not keep up due to frustrated property investors and government intervention.
High-spending tourists are returning due to pent-up demand, benefiting the sector. Labour shortages remain a challenge, especially in remote areas lacking affordable housing. Tourism operators must adapt by catering to high-end visitors and addressing workforce issues creatively.
Urban sprawl and the need for home offices ensure remote work remains popular, especially in Melbourne.
Improved technology and affordability are accelerating EV adoption. Millennials moving to car-dependent suburbs will increase demand for both EVs and traditional vehicles. Opportunities exist for businesses in EV infrastructure, such as charging stations and battery technology.
Melbourne’s unmatched capacity for greenfield development positions it as a leader in population growth and housing affordability. Property investors have a chance to capitalise on counter-cyclical buying conditions, with Melbourne’s affordability advantage expected to widen compared to Sydney.
What’s ahead for 2025?
As 2025 begins, it’s clear that demographic shifts are going to create ripples that will impact our housing markets, the workforce, Australia’s infrastructure, and even how we define affordability in our cities.
These trends aren’t just interesting statistics.
They are the foundation upon which investment strategies, business decisions, and government policies will hinge.
Last week, Simon Kuestenmacher and I started a 3 part series where we discuss the demographic trends that will shape 2025.
You can watch it here.
In this episode, we will continue to have an in-depth look at the demographic trends poised to define 2025, and what they mean for Australia and for you!
For weekly insights and strategic advice, subscribe to the Demographics Decoded podcast, where we will continue to explore these trends and their implications in greater detail.
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Greenfield developments: a decade of suburban expansion
Despite urban planners’ best intentions to promote medium-density housing and build-to-rent projects, Simon Kuestenmacher believes that moving forward our housing markets will see more and more greenfield developments on city outskirts.
According to Simon, the reasons are simple, yet powerful:
- Population Growth Pressure: With Australia’s population expected to grow substantially not only in 2025 but over the next decade, housing demand will continue to outpace supply. Meeting this demand quickly and cost-effectively makes greenfield developments that are built on the urban fringe the preferred solution to the more expensive medium and high-density apartments that take years to build.
- Cost Efficiency: Constructing homes on the outskirts is significantly cheaper, often costing only a third of what it takes to build medium- or high-density housing in inner-city locations. In other words, while infill housing aligns with long-term urban planning goals, immediate cost realities and population pressures will keep driving a surge of new greenfield developments on our city fringes.
This trend has profound implications for cities like Melbourne, which boasts vast expanses of flat, developable land.
Unlike Sydney, constrained by geographical boundaries like the Blue Mountains, the sea and parks, Melbourne can spread outward indefinitely (almost all the way to Adelaide), positioning itself to become the most affordable Australian capital city for new homes.
Having said that, Melbourne currently offers a unique window of opportunity for property investors as established properties can be bought considerably below replacement cost – in other words, investors would have the security of significant intrinsic value.
An aging Australia: the Silver Economy takes centre stage
Australia’s aging population is no longer a distant concern – it’s a reality.
In 2025, baby boomers will continue transitioning into retirement, forming the wealthiest aging demographic in history.
This creates a dual-edged challenge and opportunity:
- Aged care growth: The demand for aged care services, ranging from in-home support to residential care facilities, will skyrocket. Businesses in this sector stand to benefit handsomely, particularly those innovating with technology-driven solutions or offering premium services.
- Policy and social challenges: Governments will face increasing pressure to provide infrastructure and healthcare services to cater to this demographic. At the same time, intergenerational equity issues will gain prominence, especially around housing affordability and tax reform.
Overall, the silver economy is a sector poised for decades of expansion.
Home ownership trends: a shifting landscape
Housing affordability will remain in the headlines in 2025.
Despite all the rhetoric, around 20% of property transactions last year went to first-home buyers, but the picture isn’t as rosy as it may seem:
- Delayed home ownership: Millennials are entering the homeownership phase later than previous generations. While this demographic shift boosts aggregate ownership rates, age-specific rates (the proportion of 30-year-olds owning homes, for example) continue to decline.
- Rental demand soars: As fewer Australians can afford to buy homes earlier in life, the need for rental properties will keep rising. However, with property investors frustrated with increasing costs and government interference, the amount of new rental accommodation available is unlikely to keep up with demand, putting further strain on an already tight rental market.
To meet this demand, Australia needs more landlords.
Governments will need to strike a delicate balance between incentivising private investors such as “mum and dad” landlords and supporting institutional-scale build-to-rent developments.
Tourism rebounds: beyond pre-pandemic levels
Tourism, one of Australia’s economic pillars, is poised for a full recovery in 2025, exceeding pre-pandemic visitor numbers.
However, the landscape has shifted… and high-spending tourists will dominate.
While Australia has regained many long-term visitors, such as backpackers, it is now attracting a greater share of high-spending tourists.
This trend is driven by pent-up demand and Australia’s reputation as a “bucket list” destination.
However, tourism operators face a significant hurdle: labour shortages.
Accommodation, food services, and adventure tourism businesses in remote regions are struggling to attract workers due to limited affordable housing options.
Simon Kuestenmacher believes that for businesses in the tourism sector, 2025 is a year to refine offerings, cater to higher-end tourists, and explore innovative solutions to workforce issues.
Work-from-Home: a trend that’s here to stay
The work-from-home revolution isn’t fading; it’s evolving according to Simon Kuestenmacher.
For example, in Melbourne, where urban sprawl keeps pushing families further and further from the CBD, remote work will remain particularly popular.
This has far-reaching implications:
- Home design priorities: Buyers are increasingly seeking homes with designated workspaces. The traditional “spare room” has morphed into an essential home office for professionals working remotely.
- Transport infrastructure relief: Governments, especially in Victoria, may encourage remote work to ease strain on road and rail networks. This trend is likely to remain until transport infrastructure catches up with population growth.
While remote work is now entrenched, it’s not without its challenges.
As families grow, spare rooms used as home offices are often repurposed as bedrooms and over time, this may nudge some workers back into offices, but for now, the remote work trend remains strong.
Electric vehicles and suburban car dependency
The rise of electric vehicles (EVs) will reshape Australia’s car market in 2025.
Improved battery technology, affordable models from Chinese manufacturers, and expanded charging infrastructure are driving EV adoption.
However, this trend intersects with a broader demographic shift:
- Millennials move to the suburbs: As millennials start families and leave inner-city neighbourhoods, they move to car-dependent suburbs. This transition is expected to drive a surge in car sales, both EVs and traditional models.
This means urban planners and policymakers face a dual challenge: supporting EV infrastructure while addressing the broader increase in suburban car dependency.
For businesses, opportunities abound in EV-related industries, from charging stations to battery manufacturing according to Simon Kuestenmacher.
Melbourne’s unique position as a growth leader
Melbourne is shaping up to be Australia’s fastest-growing and most dynamic city.
With no natural barriers limiting expansion, it has an unmatched capacity for greenfield developments and population growth.
By the end of 2025, Melbourne will likely claim the title of Australia’s most affordable capital city according to Simon Kuestenmacher.
For property investors, Melbourne offers a rare opportunity to capitalise on counter-cyclical buying conditions.
With its affordability advantage widening against cities like Sydney, the potential for strong future growth is undeniable.
What does all this mean for 2025?
2025 will be a year defined by demographic shifts, economic pressures, and evolving societal preferences.
Change is inevitable, but understanding and acting on these trends can help you stay ahead of the curve and position yourself for long-term success.
For property investors, demographic changes are more likely to shape our housing markets in the medium to long term than the short-term implications of rising interest rates or tax changes.
This means understanding these demographic trends that will be critical to successful property investing.
Businesses can also thrive by adapting to changes in tourism, transport, and consumer behaviour.
If you found this discussion helpful, tune in again next week for the final part of this 3 part series and don’t forget to subscribe to our podcast and share it with others who might benefit.
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