Property helping older Aussies

Data from the Australian Bureau of Statistics (ABS) suggests that households headed by 65 to 74-year-olds were $480,000 wealthier in 2015-16 than people from the same age bracket 12 years ago.

The data, which was analysed in a report by the Grattan Institute, also showed that households headed by 45 to 54-year-olds are $400,000 richer. However, households headed by 35 to 44 year-olds are on average only $120,000 wealthier – and for 25 to 34-year-olds, the figure is just $40,000.

Figures across all age groups have become wealthier over the last 12 years, but 65-74 year olds have gained the most in that time, with soaring property prices a major factor behind the figures.

This led the Grattan Institute to claim a “wealth divide between generations” that could cause young people to fall behind and make inequality worse.

According to the ABS, house prices grew by 37 per cent on average across all the capital cities between 2003-04 and 2015-16 (and by more than 50 per cent in Melbourne alone). The boom was not limited to the capitals; prices also grew strongly in regional areas.

For households headed by 65 to 74-year-olds and 55 to 64-year-olds, property contributed about half of the total increase in wealth.

According to the report, baby boomers have also used the superannuation system to build their wealth.

Average superannuation wealth over the measured 12-year period increased by $230,000 in real terms for households headed by 65 to 74-year-olds, and by more than $150,000 for households headed by 55 to 64-year-olds.

According to the latest Census data, about 82 per cent of those aged over 65 now own their own homes, up from 79 per cent in the 2011 Census.

Opinion: False claims cause intergenerational conflict

Older Australians are locking younger people out of the housing market. Yes, here we go again with fake news about the great intergenerational divide.

Such news items may get clicks, they may even heat up the debate, but the Grattan Institute’s analysis is both fundamentally flawed and deeply divisive.

At a time when the rich are getting richer and the poor are getting much poorer, it is highly dangerous to muddy the debate with such fake news about the nature of this disparity in wealth.

Why do I call this fake news? Because the article first featured on The Conversation website, ‘Three charts on: the great Australian wealth gap’ is all about the headline and not about the substance of a very important issue. This highly respected think tank has been quite selective in its reporting of the ‘facts’ of the wealth gap, with a listicle style ‘Three Charts’ analysis of house ownership that only offers one narrow aspect of the problem.

Some of the authors’ conclusions are also illogical or based on non sequiturs. For instance, let’s consider the statement that “younger people are locked out” closely followed by the assertion that “the only way they can afford to buy a house is with help from ‘the bank of mum and dad’”. One presumes these are the same older mums and dads who are getting wealthier at the expense of younger people? How can this be if they are contributing substantial loans, or rent-free accommodation, thus reducing their own retirement income, to assist with the purchase of a home? Seriously, with the bank of mum and dad now considered the fifth largest in Australia (by volume of loans) how can we say the older generations are wealthier at the expense of the younger? At best this is a disingenuous statement. At worst, it is very sloppy analysis.

And there is a lot more that is wrong with the Grattan Institute’s take on rich and poor.

It notes the ‘struggle’ of under 45s to save, but assumes that home ownership was easily achieved in the 1960s and 1970s, when the current retirees bought their first homes. For the record this generation also experienced interest rates as high as 18 per cent. Many first home buyers worked two or three jobs, bought one bedroom flats rather than houses, used fruit boxes for furniture and did not own late model cars, or holiday overseas frequently.

The Grattan Institute also notes that there are falls in home ownership as a result of social changes – waiting longer to secure full-time work, partner and have children – but fails to note other significant changes that have had an effect on the habit of saving to buy a home. This includes the instant gratification habits of many 20 and 30-somethings who will fly out en masse to Bali, New York or the Amalfi coast to celebrate a friend’s wedding, the cost of which may include a frock worth anything from $6000 to $25,000. In this Kardashian age, conspicuous consumption is rampant and those who cannot afford a home can often be the worst offenders.

Another illogical statement in the Grattan article is that “… most Australians still want to own a home, so it is reasonable to conclude that higher property prices are the biggest cause of lower ownership rates”. One thing does not necessarily follow the other. Higher prices are certainly a contributing factor to lower home ownership – a body of academic research certainly supports this assertion. But prices are not necessarily the biggest cause of lower home ownership – other social changes including the precarious nature of work, poor savings habits and higher HECS debts all have a part to play.

And let’s not overlook the massive social and demographic changes experienced in the retirement years, when longevity means retirees have extra decades to fund and the shift of responsibility from government and industry to individuals means home ownership is critical to the prospects of a reasonably sustainable retirement, let alone a comfortable one. Older people are now expected to work longer, even though health and lack of work are the two main reasons they head into retirement (YourLifeChoices Retirement Insights Survey 2017). The highest increase in homelessness is related to women aged over 55, so the suggestion that older means wealthier is both inaccurate and damaging to useful discourse on the needs of those who are marginalised.

Factually there is a growing divide in wealth between rich and poor in Australia.

It is NOT between the old and the young. Yes, a narrow band of well-off retirees are using overly generous superannuation subsidies to treat their super as an estate planning vehicle and reduce tax.

The other 70 per cent, however, are living on a full or part Age Pension and struggling, with an overwhelming 81 per cent unsure whether their nest egg will last as long as they do. So let’s agree that there is a problem. And that it is important for all generations to own their own home, particularly when they retire and that all generations should be encouraged to do so. Thus we can reframe the debate away from an intergenerational competition, toward policies that prevent the many from this goal. Perhaps reducing or removing negative gearing for investors and overly generous superannuation concessions would be a great start.

What do you think? Are older Australians getting richer at the expense of younger ones who are now forced to rent? Or is it always difficult to get a foot on the property ladder? How did you manage to buy your own home? Did it mean using fruit boxes for furniture? 

Written by Kaye Fallick



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