Various studies have shown that the number of Australians who achieve home ownership in their 30s and 40s is steadily decreasing, leading to an increase in people renting through retirement.
“Older Australians are increasingly falling through the cracks in the growing housing affordability and supply challenge, with a growing number of older Australians needing to rent, rather than owning a home outright,” Ian Yates, Council of the Ageing chief executive, says.
Renting through retirement isn’t necessarily a bad thing, but it’s not as cost-effective as one might hope. Those who own a home at a younger age are more inclined to have a smaller mortgage as they approach retirement, enabling them to use their savings for other things.
“As my figures show, you have to spend a lot more in retirement if you haven’t achieved home ownership,” Ross Clare, director of the Association of Superannuation Funds of Australia, says in a Nestegg.com.au article.
Thanks to rising rental prices, those who have $600,000 in superannuation and a house worth $600,000 would be on par with those who retire with $1.2 million while funding rent, according to Clare.
This cost isn’t limited to the more expensive capital cities, such as Sydney and Melbourne; any capital city in Australia would require the same substantial savings.
This is something the Council on the Ageing is taking very seriously. In a policy summit held in June 2017, the housing crisis was described as a “ticking time bomb” by keynote speaker John Daley, CEO of the Grattan Institution, who called for immediate action “to safeguard the future of older Australians before it is too late”.
If they’re not at risk from the rising rental costs, retirees are suffering as they can no longer afford to pay off their mortgages in a lump sum with their superannuation – a luxury many retirees used to rely on, particularly if they purchased property later in life.
It could be years before concrete evidence on how this affects retirement is available, but it’s not hard to guess what the solution will be in the meantime: those looking to retire at a traditional age of 55 or 60 may continue pushing this milestone back in the hope that they will eventually be able to face retirement with optimism instead of fear.