Older Australians holding the property market steady

Older Australians are the reason Australia’s property prices won’t dive.

Older Australians holding the property market steady

While many experts theorised that an ageing population would lead to a slump in property prices, it seems the exact opposite is true.

An Australian National University (ANU) analyst has found that older people staying in their houses for longer are likely to push property prices even higher in the medium term.

The demand for housing is currently driven by young adults and migrants, but older people are putting off selling their homes in favour of ageing in place.

The Australia's growth in households and house prices study, led by ANU economist Creina Day, has revealed that the rising population precipitated by migration and combined with the ageing population is holding the housing market steady.

According to the study: “Underlying market pressure arises as the number of households seeking to enter the market outstrips the number exiting.

“Current retirees, who are healthier and wealthier than their predecessors, tend not to liquidate housing wealth for general consumption because they prefer to remain in their own home as long as possible.”

While increased birth rates are also stimulating population growth, the effects of the trend won’t be felt for two decades. Migration is the driving force behind Australia’s population boom, which is leading to an increased demand for housing, as 88 per cent of migrants are under 40 and employed.

Plus as households shrink, you’ll see more apartments developed to support the demand for housing. In the 80s, Australia had an average household size of 2.9. Right now, it’s 2.6 and falling.

That decline could be attributed to more single households, especially older widows or widowers holding onto houses for longer. Our increased longevity also means more couples stay together longer in their family home, even if the size of that home is more than enough to cater for larger families.

Fewer people are entering retirement villages and aged-care facilities, too. In 1991, around 40 per cent of people over 85 were in some form of non-private dwelling. Since then, that number has dropped to 25 per cent.

According to the study, the annual rate of household formation in Australia is much higher than the number of available properties. In fact, our rate of household formation is 50 per cent higher than the rate in New Zealand and double the rate in Britain.

“We find that real house prices rise over time if the rate of household formation outstrips the rate of housing supply,” says the study.

“The results explain why real house prices may exhibit an upward trend despite the population ageing and how government planning could have an impact.”

This is good news for retirees whose wealth lies in property. Many self-managed super funds (SMSF) are also heavily invested in property. But fortunately, recent fears have eased that if the housing bubble burst, so, too, would the retirement savings of almost one in 10 SMSFs.

While former prime minister Paul Keating maintains that anyone who has borrowed to buy property in retirement are an “accident down the road”, that accident may be a little further away than first thought. Still, it pays to be cautious when regarding housing as an investment to safeguard your retirement.

Read more at The Australian

Are you happy to stay in your home for longer? Do you live in a home much larger than your needs? Is the Government’s downsizing incentive enough to get you out of your family home? If not, what sort of incentive would be preferable?



    To make a comment, please register or login

    13th Aug 2018
    As long as the family home is the only asset people can have in old age without counting its worth people will push more money in that direction. It seems people would be quite happy to live in cheaper digs if they could have other investments. I looked up my first home we ever bought in inner city Melbourne, March 1978, for $39'000. Last June the place was sold for $1.160 million. Still the same size, still no garage, renovated inside.
    Should have kept I suppose and collect the full pension. Seems to me it is the only way to accumulate wealth for the kids. Never before lived in a place that is so property obsessed, apart from Monaco (scarcity of land).
    13th Aug 2018
    Yes, Cowboy Jim. I wish I'd kept a much larger and more costly home. The assets test is, quite simply, IDIOTIC! Nobody with a brain would support punishing people for downsizing and rewarding those with million-dollar mansions via taxpayer-funded pensions.
    13th Aug 2018
    Youre back Rainey
    Did you go on one of those cruises filled with OAP's
    15th Aug 2018
    Nope. Just been busy with family obligations, olbaid. Flattered that you missed me!
    13th Aug 2018

    As boomers retire and continue to age they will at some time have to sell their homes and move into care. Given the large number of boomers guess what......supply & demand takes over and prices will fall unless we import millions more people, who by the way could not afford to buy. So you get investors buying low and renting out.
    I suggest your train of thought might not be logical here Leon. Sorry.
    13th Aug 2018
    Where I live every time a family home is sold it's usually pulled down to either build several storied places or units and usually one of several owned by the same person.
    My married daughter would love to be able to buy in this area but can't because of the high prices even for units.
    13th Aug 2018
    I hope this ANU analyst was not given public money to state the bleeding obvious! Nothing new in this report at all.

    More migrants mean higher demand for housing. More aging people want to stay in their own homes. Well duh!
    Not a Bludger
    13th Aug 2018
    Right on, KSS.
    13th Aug 2018
    Yes KSS and if retirement villages and aged care hadn't been so dishonest and greedy using nasty contracts with high fees and large exit penalties people might have considered that option.
    13th Aug 2018
    Rae put the finger right on it, looked at the contract and thought I was treated like a second rate tenant. Still in my own home - no community centre, swimming pool. But happy with our decision.

    13th Aug 2018
    Ver happy to stay in my modest 4 bedtoom with media room, study and large open plan kitchen and 2 living areas.
    I would also miss my resort style pool and 700sq m backyard where I do my gardening

    Perhaps one day if I find the part pension insufficient to pay my rates and maintenance bills, I might consider moving to a penthouse apartment overlooking the harbour
    13th Aug 2018
    Haha - me thinks you should get a job as a stand up comedian, olbaid. Cash in hand and free p*ss of course. In the meantime do not put your back out with all that gardening.
    13th Aug 2018
    "what sort of incentive would be preferable?"

    3 years ago when I was researching my home options I noticed that in Victoria pensioners could purchase a home with stamp duty exemption. Not in NSW. So that is one incentive if it were to be made national.
    13th Aug 2018
    How about a "pensioner home buyer grant" as well

    Say $500k ?
    13th Aug 2018
    The only incentive would be to move to Vic and who in his right mind would do that?
    13th Aug 2018
    By your tone CJ, 5 million people who live there must be insane! Probably not wrong....:):)
    14th Aug 2018
    Not a bad idea olbaid . In fact if they gave us that home buyer grant, childcare rebates and baby bonuses we didn't get all backdated of course with interest we'd be in a pretty good spot to spend up a bit and help the economy. Even upgrade housing and that would really help.

    13th Aug 2018
    What incentive would be preferable? Honestly - we are paying researchers to state common logic and ask these dumb questions, and politicians to ignore the simple common sense answers? No wonder the nation's economy is in a mess!

    First, reduce the hideous costs of downsizing by removing stamp duty, addressing excessive agent commissions (If some agents can sell at 1% or a fixed fee, why not all?), and offering assistance with moving costs. But most importantly, OFFER SOME GENUINE BENEFIT. Letting people drop more into super is NOT a benefit when they suffer pension loss for downsizing. How can politicians be so STUPID as not to recognize that?

    Yes, I live in a fairly large home, but by necessity as I am providing accommodation for grandchildren 14+ weeks each year. I wouldn't downsize even if that were not the case. I'd be more likely to UPSIZE - since that would be far more beneficial financially given the STUPID pension rules.
    13th Aug 2018
    Lucky for some
    14th Aug 2018
    Luck had nothing to do with it, olbaid. If you evaluated the 'luck' I've experienced in my life, I'd be likely the UNLUCKIEST person alive. Orphaned in infancy, raised in poverty, chronic ill-health, education terminated prematurely due to lack of money, child born with disability, a succession of horrid poorly paid jobs, one crisis after another... and it is still continuing with a seriously disabled grandchild, very sick partner, and several orphaned grandchildren.

    I am where I am thanks to incredibly hard work and very frugal living - going without things most people regard as absolute necessities. And I believe I am justified in resenting the way the system operates to reward the irresponsible and the manipulators and punish the industrious and frugal. But yes, I'm lucky to have the brains and the intestinal fortitude to overcome all the bad luck and challenges.

    You May Like