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October 7, 2011

Is retiring mortgage free an unattainable dream?

Not too long ago the great Australian dream of home ownership was considered a way to fund retirement.


Ask any Baby Boomer and they’ll tell you they were taught to get a good job, buy their own home, pay it off and voila! You’ll be set for your golden years! While that’s not exactly true – it takes a lot more than just one house to fund retirement – it’s scary to think that many Gen Ys won’t even have the opportunity to own their own home outright when they retire in thirty to forty years’ time.

A recent study from the Australian Housing and Urban Research Institute predicts that just one in 40 Gen Ys will be mortgage free when they retire.

And that’s not the worst of it…

The study suggests that almost nine in 10 of this beleaguered demographic group will end up on low incomes that will make it increasingly difficult to service repayments and cost of living expenses.

In 2006 around 40 per cent of over-65s owned their own homes, however inflated property prices, high rates of divorce, escalating personal debt and cost of living is fuelling a substantial loss of equity, according to the Catherine Bridge of the University of New South Wales.

“It’s more alarming than we expected,” she says.

“The figures are projections for younger generations and we expect owning their houses outright in retirement will still be a priority for them. The financial security of a house will be important to them as people will be living longer and super may not be sufficient to support them.”

Concerned experts say something needs to be done by governments to ensure younger generations do not become the future housing poor.

“We’ve never seen large numbers of people carrying big mortgages into retirement before,” says Sarah Toohey, Australians for Affordable Housing spokeswoman
A study entitled The Future of Australian Homes in 2111 by social researcher Mark McCrindle suggests that 100 years from now the number of people sharing a home in Australia would be double or even treble today’s figures.

Forty per cent of those surveyed in the study said the average household would consist of four people, while 20 per cent believed the number to be closer to six.

McCrindle says many younger Australians are preparing to live with and care for their ageing parents as house prices move further beyond reach, taking the ideal of home ownership with them.

What do I think


We live in one of the wealthiest countries in the world and we’re entering a period of unprecedented wealth fuelled by the mother of all mining booms.

But the sad reality is that the majority of us haven’t been taught how to handle money or wealth or secure our financial futures, which means many Australians find their money runs out before the month does.

We’re not really taught about how to handle money or secure our financial future at school and sadly for most of us, our parents aren’t good financial role models. However there are more great books, internet sites and wealth educators around than ever before, so there’s really no reason why we shouldn’t be more financially fluent than our parents.

And if you think about it, out of all the demographic groups, Generation Ys are in the best position possible. While Baby Boomers have a few good investment years left and Gen Xers have a few more on top of that, it’s the Gen Ys who really have time on their side.

And time –which allows wealth to compound – is a great ally of investors.

Add to that the fact we’re in a property buyers’ market presenting some fantastic investment opportunities, which makes it an opportune time for not only Gen Ys, but all of us, to secure our financial futures by buying well-located investment properties. And then letting the magic of compounding, leverage and time to work its magic building our wealth.

By the way…if you’re a Gen Y beginning investor who’s a bit concerned by the findings of this report, remember it’s often easier to buy an investment property than it is to buy your first home – banks will lend you more because your tenants will help subsidise your mortgage payments.

There really is no need to give up on that great Australian dream.

Do you think property ownership is out of reach for Gen Ys, or is it still doable? What can we do to ensure this generation can still afford buy their own home?

Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. Subscribe to his e-magazine at www.propertyupdate.com.au.


  1. I am a Gen Xer with 2 teenage kids. I know many Baby Boomers who have gifted $50k to $100k to each of their kids, as a deposit for their PPOR or investment property. We parents are more financially literate these days (no excuse, there’s tons of resources out there) & we in turn pass on this knowledge to our kids. So long as people are sensible, live within their means & view frugal as the new sexy, there is no reason why property ownership should be out of reach for any generation.

    Comment by Emma — October 8, 2011 @ 5:18 pm

  2. Have to second Emma’s comment on the Baby Boomers. Some of us, myself included, have been fortunate enough to receive a gift from parents which was very handy towards purchasing a home. In spite of having saved and invested in the stock market for over 12 years before finally pooling that cash to buy a house, it was very difficult. This was at the time the FHOG was at its peak and the house in question is a typical outer suburban house in Melbourne (ie. not a mansion in a blue ribbon suburb). As a Gen Y myself, I’d like to suggest that Gen Ys face considerably more trouble in their lifetime than that of house prices alone.

    We live in an age where things are progressing rapidly. Because of this, those who are still working need to constantly re-invent themselves and remained inform to keep up with the change. There is added competition from the ever increasing amount of educated and skilled people being ‘pumped’ into the market by universities and other facilities. Gen Ys are being bombarded left right and center by lots of information, ideals and concepts. The sheer availability of information should make life easier for the Gen Ys, and perhaps it did, up to a certain stage. Now it just fuels the competition.

    The vast majority of Gen Ys spend their paycheck even before they have it, or are actually happy to see $40 in their account when they presumed they were completely broke. Amongst the Gen Ys that I hang around with, I can count on the fingers of one hand the number of them that will even be able to qualify for a mortgage to purchase a home, let alone to fully own one when they’re retired. Got to admit, much as I’m worried about my own financial future, I do worry a lot about my friends as well. I have suggested to many of them to work out a budget, start saving and work towards something more solid than their iPhones, but many of them are in a state of apathy.

    They say, ‘Buy a house? You’re joking! Have you seen the prices these days?’ Might as well stick to buying what they can afford…such as iPhones.

    The Gen Ys cop a lot of fleck for their ‘want it all, want it now’ attitude. But we should step back for a moment and consider this: a similar thing is expected of them. That is, their bosses too, ‘want it all, want it now’. It could become a debate of whether society makes the person, or the person makes the society, but personally I think we’ve been too hard on the Gen Ys. It is difficult to take things slow when speed is the very essence of how things run today.

    The lack of financial wisdom by the Gen Ys is going to have a flow-on effect many years into the future. The pension that is needed to support these folks is going to be enormous, and future generations will pay dearly for it. We need to implement formal financial education for young people of today, and FAST!

    Comment by House — October 19, 2011 @ 6:03 pm

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