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Baby boomers hit by affordability and tough property market

baby boomers consider their retirement and property optionsDespite buying property during the late 1980s and early 1990s when interest rates reached 17%, more than half of baby boomers (55%) believe young buyers today have it tougher entering the housing market.

According to our latest research, baby boomers sympathise with young buyers because they, too, are grappling with affordability pressures.

Baby boomers are often touted as one of Australia’s most prosperous generations. They are living longer than previous generations, retiring later, and are commonly labelled as the beneficiaries of Australia’s growing property market.

But our findings tell a different tale.

The Baby Boomer Housing and Lifestyle Report – examining the affordability concerns, retirement plans and housing and lifestyle preferences of over 2500 baby boomers nationally – reveals the majority of baby boomers do not believe they are well off and are concerned over the impact of current house prices.

  • 37.8% believe they won’t have enough money to fund their retirement
  • Around a third of baby boomers are uncomfortable with current house prices
  • 15.5% feel they are being priced out of the market by other buyers
  • 8.9% of baby boomers nationally are stuck on the rental roundabout without any intent to buy
  • Of those who are downsizing, 16.2% are doing so because they can’t afford to live in their current property in retirement
  • Of those who anticipate having to move to another area/state/country, nearly a third are doing so to be in a more affordable area

‘Encore’ years short changed

The report also shows baby boomers’ hopes for the lifestyle they wish to lead in retirement are being tempered by concerns of making ends meet.

More than half of baby boomers said they would need over $46,000 per annum to live comfortably in retirement – higher than the estimated $42,200 experts say is required[1].

Being able to take holidays in retirement was ranked as most important by baby boomers, followed by health/fitness (e.g. club memberships), social outings/entertainment, dining out and shopping.

But only 35% will be using Superannuation to fund retirement. A further 22.2% will be reliant on Government pension, 6.1% anticipate they will remain in casual or part time work to support themselves, and just 12.1% will be able self-fund/rely on savings.

It goes to show that baby boomers, like young buyers, are struggling to navigate a range of new affordability pressures including rising house prices, plans to lift the pension age to 70, a high jobless rate, future changes to indexation of the age pension, and the need to support themselves for decades to come.

So what are the solutions for baby boomers already on the doorstep to retirement?

Much of the answer lies in policy. Recently there’s been talk of a ‘last home buyers grant’ to assist older buyers to secure a property, particularly in a market where downsizing is often no longer conducive with a lower price tag. Stamp duty concessions for older Australians would also assist with housing affordability.

Rethinking the proposed pension age increase is another solution. If baby boomers are expected to work until they’re 70 and not access their Superannuation until this time, older workers are going to require support to find suitable jobs, particularly part-time employment, which isn’t available currently.

Reconsidering Superannuation rules to introduce a higher contribution for people over a certain would also boost retirement savings faster for soon-to-be retirees.

In the meantime, baby boomers should ensure they make savvy financial decisions to confront the challenges of retirement. If you’re still working, you may be able to salary sacrifice more into your Superannuation to boost your nest egg and reduce the tax you pay. If you’re retired, you may be able monetise your existing skills by starting a new side business. If you’re buying, look for areas with strong capital growth potential or investment properties in areas with strong rental yields.

Financial realities are cutting the aspirations of many baby boomers short, so now’s the time to get creative to ensure the ‘encore’ years live up to what you imagined.

Read the full report here. 


[1] Estimate according to the Association of Superannuation Funds of Australia (ASFA)

Category: Finance, Investment, Market Intelligence & Commentary, Moving, Real Estate | Leave a comment

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