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News.com.au
3 hours ago
- Business
- News.com.au
‘Forced to stay put': Financial adviser defends controversial Aussie Boomer housing trend
Baby Boomers living in oversized homes that could better serve young Aussie families are being 'forced' to stay put due to lack of incentives, experts have argued. Just 19 per cent of empty nesters in Australia moved into a smaller property after their children moved out, an Australian Seniors survey found in April, versus a whopping 69 per cent who had chosen to hold onto the family home. According to the survey, the least likely to move on were high net worth individuals – only 8 per cent of those worth over $200,000 had downsized. To the thousands of young Australians for whom property ownership seems like more and more of a pipe dream, such statistics probably read as selfish – especially given a Retirement Living Council (RLC) report this year found 59,576 homes could be unlocked if older generations were to downsize. Yet financial adviser Helen Baker told The Daily Mail on Sunday there was a fair reason why Boomers were hesitant to let go: to protect – and maximise – their pension entitlements. If a couple were to sell their $2 million Sydney home and purchase a $1 million property somewhere like Port Macquarie, the $1 million windfall could affect their age pension eligibility due to the federal government's assets test, Ms Baker explained. Though property is exempt from the test, leftover funds in cash or superannuation are counted. Older Australians are therefore delaying selling their homes – even if they no longer need the space – until they've run out of super and downsizing is their back-up to release more cash. According to social analyst and demographer Mark McCrindle, potential downsizers are perturbed by the financial burdens associated with selling and repurchasing – but the greatest barriers are the emotional and practical ones. 'This is the home they raised their children in – to give up that family home is to give up sentimentally and is a signal that the parenting stage has ended,' Mr McCrindle said, adding that 'many (parents) don't want to admit that'. A financial incentive from the federal government was needed to encourage older people to 'right-size' and move to more suitable accommodation. 'They don't want to be penalised when they downsize,' Mr McCrindle said. 'The support of others can get through the practical and emotional blockages, where the young people step in and say, 'Don't worry about the move and decisions, we will help'.' PropTrack senior economist Eleanor Creagh agreed that the decision to downsize 'isn't just financial' but 'very personal'. 'And the cost of stamp duty and a lack of suitable alternatives is a disincentive for a lot of older Australians – particularly given all the emotional and cultural factors at play,' Ms Creagh continued. Retirement Living Council executive director Daniel Gannon noted that many retirees were trapped in an 'asset-rich, income-poor' scenario. 'The financial disincentives to 'right-size', including harsh pension penalties, force them to stay put, despite the huge benefits of transitioning to retirement communities,' Mr Gannon said. 'Older Australians must be reassured that 'right sizing' is financially safe, not a decision that results in monetary loss.' 'Silver tsunami' can't solve crisis In the United States, analysis by leading real estate marketplace company Zillow last December found that a 'silver tsunami' – a wave of empty nesters selling their properties and downsizing – would do little to curb the nation's housing affordability crisis, given they often weren't located in areas where demand is highest. 'Even if we did see a 'silver tsunami', a look at the map tells me it wouldn't really move the needle in terms of solving our housing affordability crunch,' senior economist Orphe Divounguy said. 'These empty-nest households are concentrated in more affordable markets, where housing is already more accessible – not in the expensive coastal job centres where young workers are moving and where more homes are most desperately needed.' Data from Finder in Australia also found in November that cashed-up Baby Boomers looking to downsize were eyeing the same coastal hotspots as young buyers hoping to get on the property ladder. The research determined its findings by assigning each hotspot a 'Downsizers Index', calculated by multiplying the suburb population with the percentage of those aged 65 or older and the percentage of those who lived at another address a year ago and then ranked out of 100. Queensland proved to be Australia's hottest retirement destination – particularly the Gold Coast's Main Beach, where 37.1 per cent of all residents were aged over 65, 21 per cent of whom had been living at another address 12 months prior. It earned a Downsizers Index of 8 per cent – the highest in the nation. 'It will be interesting watching the property prices in these areas, because obviously when people are retiring they're downsizing from a house they've most of the time paid off the mortgage for, so they're moving with cash and they have a lot more flexibility in terms of adapting to price demands,' Finder's head of consumer research Graham Cooke explained.
Daily Mail
a day ago
- Business
- Daily Mail
Why boomers are holding on to their massive homes - even if they want to downsize
Aussie boomers are often criticised for not downsizing, but there's a good reason why they're holding onto their big properties. New data from the Regional Australia Institute shows that only 25 per cent of Boomers - aged 65 and older - are open to moving from a capital city to a regional area - the lowest of any age group. In contrast, 57 per cent of Millennials and 37 per cent of Gen Xers are more willing to make a tree change. Selling a $2million home in Sydney could allow a couple to buy a $1million property in coastal towns like Port Macquarie or Coffs Harbour - leaving them with $1million in cash. But that windfall could affect their eligibility for the age pension due to the government's assets test. While the family home is exempt from the test, any leftover funds, whether held in cash or superannuation, are counted. As a result, many older couples are choosing to stay in their large homes to protect their pension entitlements, despite no longer needing the space. Financial adviser and author Helen Baker said older Australians are delaying selling their homes to ensure that they maximise their pensions. They usually only sell when they've run out of super and downsizing is their back-up option to release more cash. A couple with $1million in cash, after selling the family home, could potentially put that money into super and live off an income stream known as an annuity. But having access to the age pension, or a part age pension, can help with bills ranging from electricity to health costs, plus travel. 'There are benefits in even getting a part age pension,' Ms Baker said. The Association of Super Funds of Australia says couples need $73,875 a year for a 'comfortable' retirement which includes an overseas holiday every seven years. But with access to an age pension, it's possible for those aged 65 to 84 to live on $43,753 a year. When it came to younger Australians who don't own a home Ms Baker, the founder of On Your Own Two Feet, suggested they consider purchasing an investment property with a friend or a sibling to at least get into the housing market. 'I think the problem for younger people now is they don't get in,' she said. 'It's likely that property will continue to rise over the short-term, maybe, and even definitely the medium, long-term.' Australia's median capital city house price of $1.026million is beyond the reach of the average, full-time worker on a $102,742 salary. That's because the banks are reluctant to lend someone more than 5.2 times their salary before tax. This means an average-income worker would only be able to buy a $665,000 apartment with a 20 per cent mortgage deposit. Those wanting a house would have to do so with a friend or sibling if they weren't married or in a long-term relationship, unless they were in a highly-paid job. 'The nurses, the teachers, aged care workers, childcare workers, hairdressers, for these people, it's incredibly difficult for them to purchase a property but those who are in more executive positions, or even tradies these days with what they're earning, they have more of an opportunity,' Ms Baker said. 'Are they willing to make the sacrifices in other things that they're spending their money on - to meet the obligations of their mortgage?' The e61 Institute think tank said unaffordable house prices meant younger Australians were delaying key milestones like buying a house or starting a family. 'Today's young Australians are navigating a different economic and social landscape than the generations before them,' it said. 'While young people always face a degree of precarity as they transition into adulthood, there are social and economic changes, as well as changing preferences, that are pushing key life milestones – like buying a home, moving out of the family home and starting a family further down the track. 'Today's 25 to 34-year-olds have a lower home ownership rate compared to their parents when they were the same age – with this disparity greater in capital cities.' This is also particularly the case for those unable to access the Bank of Mum and Dad to get into the housing market. Millennials are increasingly relying on their boomer parents to set themselves up financially, including with that 20 per cent mortgage deposit. Ms Baker said this was now the new divide between the haves and have-nots. 'There's a lot of talk about getting some early inheritance from the Bank of Mum and Dad,' she said. 'To me, this deposit for a house and buying a property, it's become the new private school.' Those boomers helping their children - by selling their family home - are also making a financial sacrifice by comprimising their ability to get the age pension.
Yahoo
20-03-2025
- Business
- Yahoo
Tradie forced out of major city with just $23 reveals common money mistake
A young tradie has revealed his biggest piece of savings advice for other Australians. The apprentice electrician was stopped in the streets of Sydney and shared he had just $23 in savings to his name. The 19-year-old said he was a third-year apprentice and had gotten into the job when he finished school through a mate. When asked for his advice on saving money, he had a word of warning for others. 'Don't get into cars. Don't start buying cars and working on cars,' he told property app Coposit. RELATED Tradie boss's pay warning as $14,000 apprenticeship issue exposed: 'They get better money' Coles, Woolworths trick to get $100 off grocery bill every month: 'Beat them at their own game' Centrelink change to see thousands more Aussies eligible for age pension The Sydney man isn't the only one who has warned others about falling into the trap of buying cars. Former tradie and FIFO worker Brodie White said it could be a huge mistake to buy a ute on finance and ultimately it was 'not worth it'. 'I've spent roughly $70,000 in the last three years on ute payments and accessories for my ute,' he shared. 'Now, a few years have gone by, if I were to sell my ute I'd probably only get $50,000 for it out of my $70,000 investment.' The tradie revealed he would be moving out of Sydney soon because the cost of living had gotten 'crazy'. 'House prices, inflation, everything's no good,' he said. Sydney home values hit $1,186,459 in February, according to the latest CoreLogic data, above the national average of $815,912. Inflation rose 2.4 per cent annually, down from the 2.8 per cent rise recorded by the Australian Bureau of Statistics in his current financial position, the young tradie said he had 'no big regrets' yet. Tradies often have to slog it out with low wages when starting out their careers as apprentices, but they can expect higher pay once they are qualified. Third-year sparkies can earn between $20.24 and $25.17 an hour as a minimum, depending on their level of high school education and age, according to the Electrical Trades Union. Qualified electricians earn an average of $90,000 to $110,000 a year, according to SEEK. Financial adviser Helen Baker told Yahoo Finance it could be easy for tradies and FIFO workers with 'money to burn' to get caught up buying the more extravagant things in life. But she warned that cars were depreciating assets, meaning they declined in value over time. 'You're paying for [the car], then you're paying interest payments on top of it. So, you're paying way more than what it was originally worth but it is also a depreciating asset,' Baker said. 'So, if and when you have to sell it, it is going to be worth way less than what you originally paid for it and what you paid back in interest repayments.'Sign in to access your portfolio
