Home ownership dream could be in twilight years

If current home ownership trends continue, one in four Australian retirees will be renters rather than home owners by 2040, a new white paper by Australia’s largest superannuation fund claims.

Rather than invest in property, people are choosing to invest more money in their super funds. Data compiled by REST Industry Super shows that in 2000, 18.6% of those aged between 45 and 54 had more than $100,000 in their superannuation funds. By 2007 this had risen to nearly 27%. The proportion of people aged between 35 and 44 who had between $50,000 and $99,999 invested in super increased from 10.4% to 18.4% over the same period.

Correlating this with ABS home ownership data from 1995-96 to 2007-08, the report shows that the percentage of people under 35 who either owned their homes outright or were paying off mortgages declined from 45% to 37%. If this pace of decline continues, the report argues, it is “inevitable that for an increasing number of Australians, buying property will no longer be the largest investment they make in their lifetime”.

The decline in home ownership is more pronounced the younger the age group. Extrapolating the current 2007-2008 home ownership data reveals that by the time those currently aged between 45 and 54 reach 65, in the next eight to 17 years, one in five will retire without owning their own home.

When those currently aged 35 to 44 reach retirement age, a quarter will not own their own home. And by the time today’s 25- to 34-year-olds reach 65, in 28 to 37 years, a third will be still renting.

“This trend in declining home ownership reflects a combination of both choice and necessity. Some people in younger generations are consciously deciding not to purchase a home. Meanwhile, others want to buy a home but are unable to because of the reduced affordability of housing, especially in capital cities,” the report says.

According to REST Industry Super, the dual trends of lower home ownership and rising superannuation balances means that individuals who do not own their homes will need to ensure they have sufficient alternate retirement savings, which may include superannuation savings.

The median superannuation balance for 55- to 64-year-olds was about $70,000 in 2007. “Unless this is supplemented by other retirement income, like a home or investment property, $70,000 is unlikely to be adequate to support someone through the 15-25 years of their retirement. Retirees will be heavily reliant on the age pension and associated benefits,” the report says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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