Excessive or indefinite deferral of home purchase can have consequences.
A new report released by the Centre of Excellence in Population Ageing Research (CEPAR) this week concludes that those at greatest disadvantage in retirement are renters, with relative poverty rates in this cohort among the highest in the OECD.
The report, Housing in an ageing Australia: Nest and nest egg?, finds that there have been delays in home purchase in the population but that these are consistent with other social and demographic trends.
“Homeownership serves multiple purposes and housing outcomes affect financial and personal health and wellbeing over the life cycle,” said lead author Rafal Chomik. “It acts as a home – the nest – as well as a store of wealth – the nest egg – to guarantee financial security in retirement.
“As lifespans increase and Australia’s population ages, it is important to understand the interactions between demography and housing.”
Professor John Piggott from the UNSW Business School explained that Australia’s homeownership is critical to a comfortable retirement.
“Housing has long been a critical pillar in wellbeing and social support through the life course,” Prof. Piggott said.
“One way or another, it has always been a central piece of our social support system. It is at least arguable that our social protection system has relied on a high owner-occupier ratio in order to function sustainably and adequately.”
With the Australian retirement system built on the premise of homeownership, excessive or indefinite deferral of home purchase can have consequences.
“Lifetime homeownership rates will decline if some people postpone purchasing a home indefinitely,” said Mr Chomik. “Banks may be reluctant to lend past a certain age, given retirement ages are increasing more slowly.
“There is the potential that in the future more older people end up renting and, if so, we need a safety net to support them as the current retirement income system is failing renters,” he said.
“Currently, the Age Pension offers the same maximum benefit for owners as it does for renters. The government’s retirement income system review, due to report next year, is an opportunity to take housing into account more fully with the aim of narrowing the financial gap between renters and owners in the future.”
The report outlines some of the challenges associated with people postponing their home purchase indefinitely and looks at how it may lead to vulnerabilities at older ages, including relative poverty, housing affordability stress and, in the extreme case, homelessness.
New estimates, that take account of housing, suggest that older Australian renters have among the highest relative poverty rates in the OECD. They also have greater rental affordability stress than other age groups.
While increases in measured homelessness among older women were due to greater numbers in this age group rather than higher incidence, their increased use of homelessness services was disproportionate.
Does the government need to do more to look at narrowing the gap between renters and homeowners in the future? What can be done to ensure renters are not left severely disadvantaged by the pension system?
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