Property gains spark inequality claims

Font Size:

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? 

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

Written by Kaye Fallick

76 Comments

Total Comments: 76
  1. 0
    0

    The victim generation are victims according to them. No surprise there. Certain groups in the community trying to whip up an argument between the generations , probably so they can argue for less support for the older generation. The victim generation needs to remember they will get old too. Some whining 20 something saying I’m 20 why don’t I have more money than someone who has worked for 50 years. Oh dear!

    • 0
      0

      Absolutely Tib !! We are in the process of ‘downsizing’ because I’m tired of physically maintaining a fairly large home and decent sized yard etc 😉 Few other reasons also of course but that is the guts of it. So far (only been at it 10 days) the interest is encouraging. However, a few comments like ‘shame there isn’t a second bathroom’, ‘it IS 40 years old’ etc from parties who are obviously much younger than us really amuse me when the other benefits are obvious. It doesn’t have an asking price of OVER $500,000.00, it HAS 4 bedrooms, TWO entertainment areas, a SEPERATE bar-room, a SEPERATE den etc etc. Oh, also WALKING distance (no need to take the compulsory 4WD to the shops) to a MAJOR shopping centre and 30 min drive on a major motorway to the state Capital and 30 min drive on a major motorway to beautiful beaches and entertainment etc. Fingers crossed a sensible family WILL see the real opportunity here soon 😀

    • 0
      0

      Good luck heyyybob.

    • 0
      0

      Cheers Tib 🙂 Forgot to mention that we well fenced (good pets/kids) and have a mature mango tree, guava tree and a mulberry tree PLUS a very nice raised veggie garden and two u-beaut passionfruit vines 😀 ….. a bargain for a sensible Aussie family 😉

  2. 0
    0

    My first house 35 yrs ago had an outside toilet!! Yes you had to go OUTSIDE!
    Yes 17% interest rates..NO first home buyers gift.
    NO new car until I was over 40……
    Yes had to SAVE up for 3 years to get to europe!
    Airfares are less now than they were 30 years ago.. ie BNE-AKL $250 one way, now less than $200… I could go on but really whats the point…grow a pair and save your own money and get your own house!

    • 0
      0

      Absolutely Kaye 🙂

    • 0
      0

      I agree. We built in 1973 and had the loan pulled when liquidity collapsed. It ended up taking 7 years to finish the build from saving as we went along. The rental house toilet was a pan way out the back and we had a mattress on the floor, an old wardrobe and some planks on bricks. I was 27 with two kids before I bought my first ancient morris minor. Plus I’d started work at 15 during school holidays and weekends and have always held at least one job, sometimes two and occasionally three.

      I wonder if Grattan will be quite so ready to write about the loss of all the fake wealth bought with fake money after the fake property prices fall.

    • 0
      0

      Totally agree! We paid 17% interest for our home loan too. We had 2nd hand furniture, not all modern and brand new. We didn’t have to get a 4 wheel drive to keep up with the neighbours either. You have to sacrifice to get ahead.

  3. 0
    0

    The extra money is their super. Check in another 12 years to see if it is still there.

  4. 0
    0

    I have come to the conclusion that anything that comes out of the Grattan Institute is a waste of time. They will massage any statistics to come up with a sensationalist headline.

  5. 0
    0

    Oops I almost missed it. There’s that equality word again.
    It means I want something that belongs to you.
    It used to be about equal pay for women in the workforce and now its being applied to everything.

    • 0
      0

      Here they come Charlie…..”you can BE anything you want, have anything you want Darlings” You WON’T have to bust a gut for 20-30 years being sensible, frugal or whatever and S A V I N G instead of spending all the time……..just want it, that should do the trick !!!

    • 0
      0

      The cunning little rascals could just wait to inherit… from that older generation who slogged and saved etc…..

      We’re going SKI-ing, the ex and I (I’m her carer, remember and she’s not that great) …. two bathrooms, three toilets and recently reno’d… two odd hours by freeway from Sydney, river nearby and lakes and ocean twenty minutes away … boat ramp to lake ten minutes …. big yard with fruit trees and gardens of the lifestyle and the vegetable kind… one garage and two car ports … any offers?

    • 0
      0

      Gudonyer Trebor. Old Zen ‘thing’……First responsibility is to yourself THEN your nearest and dearest 🙂 Good luck and hope the two of you thoroughly enjoy your SKI-ing 😀

    • 0
      0

      Good luck TREBOR. Enjoy. You get no thanks for frugality and saving or being self sufficient in Australia these days so may as well enjoy SKI-ing.

    • 0
      0

      If they want what we achieved through hard work and being modest in our goals when we were younger then they need to try doing the same themselves and not expect to have the latest new car and a very large house to start with. It is called sacrifice and it is what most of us had to go through.

  6. 0
    0

    I remember walking an hour each way to get to work ,no room for fancy jogging.sleeping on a mattress on the floor.Our big night out was watching the planes land at eagle farm.But at 28 we had a house and a child and the sacrifices set us up.Now we have the big house,the 4 wheel drive and the overseas holidays.The current generation needs to start at the bottom and not try for all in the first few years.

    • 0
      0

      Gudonyer Bob. Remember that there ARE a lot out there, like you and you will only hear from whingers who don’t know how or don’t want to do what we did to get where we are today 😉

  7. 0
    0

    Insulting article, no more needs to be said.

  8. 0
    0

    We live on the age pension and live comfortably because we own our home and other possessions outright. Also have solar power installed. We use all the pension and seniors discounts to the max. So we are OK and our kids are OK partly because we reside in regional Queensland where housing prices are way below those in the cities. $200,000 buys you a really nice large home here.
    But I do empathize with both younger and older people who don’t own their home and reside in a city where the prices are horrendous. A possible solution for them is to buy a motor home and I know a few who have done so with great results.
    As to a wealth divide between young and old…there has always been a wealth divide there…the growing divide today is between rich and poor of all ages.

    • 0
      0

      Motor homes were popular about 10 years ago when I retired early with illness
      If a person was no longer able to work full time they could apply for disability pension, but over $70000 in the bank brought a reduction in the amount of pension that was permitted. Motor homes were a good idea for getting down the big bank balance.
      Super could be drawn 55 to 65yo but just letting it sit in the bank brought about less pension money, if applying for disability pension.

    • 0
      0

      Not always easy to find a park for the motorhome.

  9. 0
    0

    I got my first new car when I was thirty. I must be wealthy then. LoL. The media has screwed the minds of the younger generation and now they are trying to screw the minds of the older generation.

    • 0
      0

      Yup. If ‘they’ keep coming out with this unreal shite then, after a while, it WILL stick in some peoples minds and they WILL believe it 🙁 After all ‘they’ were ‘programmed’ (sitting in front of TVs for YEARS) by absorbing the advertising about products they don’t need etc.

    • 0
      0

      Not just the media Crimmo, its also the parents of these 25-34 year olds who have brought them up as the entitled generation

    • 0
      0

      Yes KSS. ‘As you sow so shall you reap’ coming back to bite some people in the bum, hey ? Finally, also, ‘where there is a will, there will be the relatives’ ….. HOOAH !!! (Head Out Of Arse OR Heard Understood & Acknowledge) hey ?

    • 0
      0

      Yes – girl at the local IGA comes to work in a Merc X5 (I think it is)… it’s tough out there…. hard being eighteen or so these days…..

    • 0
      0

      Bwahahahaaaa !!

  10. 0
    0

    It’s official – Grattan has no credibility any more.

Load More Comments

FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Finance

Tobacco and childcare drive cost of living increase

The Consumer Price Index (CPI) rose 0.9 per cent in the December quarter. According to the Australian Bureau of Statistics...

Age Pension

Retirement system ‘uncertain for almost all retirees’

Australia, a nation of almost four million retirees, has one of the world's best retirement systems. The 2020 Mercer CFA...

Finance

The big question: How much do I need to retire?

Life expectancies continue to rise, and with that comes a host of challenges. For governments, there's the increasing cost to...

Finance

Understanding the true cost of retirement

The Australian government spends billions on boosting retirement incomes. The two biggest costs, the Age Pension and superannuation tax concessions,...

Age Pension

Adequacy of retiree nest eggs

YourLifeChoices conducts several surveys each year to gauge the financial, physical and mental health of our 260,000 members. The aim...

Age Pension

Age Pension payments in 2021 – what you need to know

World heavyweight boxing champion, Olympian, ordained minister and successful entrepreneur George Foreman returned to the ring at the age of...

Age Pension

Services and rebates that can save you hundreds

Last year, I put together a retiree checklist. In 2021, there are some additions. This is a long list and...

Age Pension

Pension rates, PBS entitlements, health fund changes

YourLifeChoices keeps you up to date with retirement income changes. PBS co-paymentsThe maximum co-payment for general patients for drugs listed...

LOADING MORE ARTICLE...