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