A new study forecasts changing fortunes for our children.
I don’t know about you but I was highly irritated by that series of television ads which depicted older Australians, the so called Grey Nomads, living it up in retirement.
The ads were accompanied by the tag line that these people were “spending the kids’ inheritance”.
This irritated me on two levels: first, the inference that they were doing something illicit and second, the idea that this somehow made it all the more enjoyable.
Personally I have quite a few more years to work, but when I get to retirement I won’t fit the image of those ads.
I will need all of my accumulated wealth to fund my later years, and while I’m spending it I won’t be feeling guilty. I will have worked for that money, just as my three children – faced with no inheritance – will have to work to safeguard their own future.
But I was cheered to read this week that Australian house prices would rise at a lower rate over the next 40 years than they have over the past 40.
That’s not good news for present day investors like me, but it’s good news for our children if they are to have any prospect of owning their own home, given that Australia currently has one of the worst rates of housing affordability in the world.
According to a study by the Swiss-based Bank for International Settlements (BIS), the ageing of our population means house price increases over the next 40 years will be about 30 per cent less in Australia than they would otherwise have been.
The study rejects suggestions that the retirement of the baby boomers will be accompanied by an asset price crash, but says capital growth will be much harder to achieve.
Examining the global influence of an ageing population, the study found Australian house prices have been the fourth fastest growing in the world over the past 40 years, rising just under 200 per cent. In Spain and Britain, prices tripled between 1979 and 2009, although these countries have since experienced big drops.
The BIS, which advises the world’s central banks on emerging financial risks, says it doesn’t expect demographic factors alone to cause a house price crash.
“They suggest that in the next 40 years, house prices in advanced economies will face a more difficult environment than in the past 40 years,” the study says.
The BIS study shows demographic factors pushed Australia’s house prices about 33 per cent higher than they would otherwise have been between 1979 and last year.
I am one of those who has benefited from this increase in prices through the boost to the value of my own home and investments.
But my ageing, and that of Australians in general, may also help our children afford to buy their own.
Let us know what you think.