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In this week's episode, Dave, Cate and Pete accept yous through:

  1. Who are the baby boomers?The infant boomer generation were born between 1946 and 1964 and would be currently be aged between the ages of 57 to 75 years. Baby boomers make up 25% of the population, but own more than half of Australia'due south national wealth (53%). Given the baby boomer generation take the highest home ownership charge per unit of all cohorts (in a higher place 80%), a lot of their wealth would exist tied to belongings. Their economic footprint is twice as large equally their demographic footprint, however, due to compound growth over time, it makes perfect sense that the older accomplice should take proportionately more than wealth than younger ones.
  2. Furnishings on Australian residential holding. Unlocking the baby boomer'due south wealth in belongings (which could be around two trillion dollars), could exist critical to the hereafter of dwelling ownership rates, and potentially also to the cosmos of seniors' accommodation, and to aged care policy. Every bit our population is ageing, there volition exist added costs associated with supporting the older generations, plus more demand for suitable property for our older generations (including anile care). Lower abode ownership rates have been recorded in younger generations, no doubtfulness due to other social reasons, including people choosing to get married and offset a family later in life. A study by the productivity commission concluded that 60 per cent of people born between 1942 and 1951 (early baby boomers), endemic homes by historic period 25-34.  This dropped by 15 per centum points to 45 per cent for those born 1982 to 1991.Applied science, affordable travel, less social pressure level to marry and have children, and the proliferation of casualised and contract employment accept all, no doubt, played a role in this changed trend.
  3. Rightsizing vs downsizing. The term rightsizing has gained popular use, as many people may cull to downsize their yard or internal floor area, just not necessarily downsize their budget. This include those who choose to have a 2d dwelling – a tree or bounding main modify home, plus an inner city pad to stay close to the activity, friends and family. City living offers many benefits, including proximity to the airport and infirmary/care facilities. Now we are seeing many cull to take a side-pace, rather than a downsize. Some even enjoy an upgrade option into a smaller and more optimally located dwelling.
  4. What causes people to stay in their long-term home and what are the furnishings?There are many reasons, lifestyle related and financial which cause people to choose to stay in their dwelling rather than downsize. 8 out of 10 people desire to 'age in identify', pregnant that they don't want to downsize. They are comfy, close to their friends and family, their current home suits them best, plus the logistics of having to organise a movement feel like a burden. In addition, if a downsizer has retired but hasn't paid off their mortgage, obtaining some other mortgage becomes increasingly hard. This causes the trouble of 'underutilisation' in the belongings market, which is where people ain a abode with more bedrooms or more than yard space than they need. The trio discuss what that means for younger families looking to upgrade.
  5. Authorities incentives to downsize miss the mark. A number of initiatives have been introduced by Country and Federal Government to encourage older generations to downsize, including: state postage duty relief, NSW abolishing stamp duty and Super contributions across the current concessional limits. However, none of these initiatives deals with ane of the critical financial obstacles to downsizing, which is that selling the abode and converting it into a financial asset could reduce the age pension and increase contribution to anile care. They also exercise not address the abundance of not-financial considerations which drive the decision to rightsize or stay in identify.
  6. Righsizing traps to avoid. Those who are approaching the flexibility stage of life or currently transitioning to retirement need to remember about what they desire in a home. A maintenance or a renovation projection is most likely not on the cards for those who are ready to start relaxing. Many get excited by buying brand new, off the plan, properties. For those wanting to pass property to their kids, these properties ofttimes have limited prospects of capital growth, or at the very least they underperform due to insufficient "state to nugget ratio". They also risk a long await time from signing the contract to moving in, which can exist frustrating for anyone who is excited about the prospect of moving into their new dwelling.
  7. The greatest intergenerational transfer of wealth is yet to be seen. 85% of Australians who practice rightsize, programme to do so before age lxx. With the current cohort of infant boomers, betwixt the ages of 57 to 75 years erstwhile, nosotros have 13 more years of babe boomers expecting to sell up. The residual are likely to stay in place until they must move or will pass property on in their inheritance. What this means is that we're likely to see the greatest intergenerational transfer of wealth over the next 20 years or and then.

Resources

  • How to develop your own Property Program – showtime with the end in heed! (Ep.4)
  • How age and stage of life can impact your holding plan and selection (Ep.13)
  • Why the family habitation is oftentimes the biggest piece of the investment puzzle (Ep.21)
  • How many properties practice yous need to retire wealthy? (Ep.27)
  • Starting without a plan and end goal – No.three of the top 7 Critical Mistakes (Ep.33)
  • Property five shares – how to strike the right rest in your investment portfolio (Ep. 79)
  • Holding planning and your next purchase – critical considerations and why modelling fiscal outcomes is vital to success (Ep.92)
  • How will your mortgages serve you in the long run?
  • Five mortgage strategies that can grow your wealth
  • How mortgage strategy shapes your power to hold property, and grow your wealth for decades into the futurity! (Ep.24)
  • How our mortgage strategy helps the states to hold backdrop
  • How to succeed with Belongings and Create your Ideal Lifestyle
  • Mortgage Strategy 101 – YouTube video serial.

Show notes

  • Who are the baby boomers?
  • Generation built-in between 1946 and 1964
  • They would be most 57 to 75 years erstwhile
  • Baby boomers brand upwardly 25% of the population but own more than one-half of Australia's national wealth (53 per cent) –given they take the highest home buying rate of all cohorts (above fourscore%), that a lot of that would be tied into property.
  • Their economic footprint is twice as large as their demographic footprint.
  • The boomers take been the beneficiaries of a virtually 50-twelvemonth economic miracle which is called Australia, and they are unlikely to ease out of this accumulating whatever fourth dimension before long, which see Australians on average the wealthiest country per capita in the world based on various benchmarks.
  • That said, due to compound growth over time, the older cohort should have proportionately more wealth.
  • Likewise, Commonwealth of australia'due south productivity levels have been declining, then you could certainly debate that their wealth is well earnt through difficult piece of work. Success doesn't come by risk very frequently.
  • Overall, it's a home-owning, mortgage-calorie-free, "asset rich, cash poor" generation which the Productivity Commission concluded "owned nearly of Australia'due south dwelling house equity".
  • Unlocking that wealth in belongings – which is around two trillion dollars' worth – could exist critical to the future of home ownership rates, and potentially too to the cosmos of seniors' accommodation, and to aged care policy as office of our aging population and the added costs related to this.
  • Disincentive to sell and downgrade.
  • Increase pressure on single level dwellings – future proofing property, creates issues for others that take this key requirement
  • Increase in demand for inner urban center living.
  • Lower dwelling house ownership rates occurring in younger generations, people getting married later, having kids later.
  • sixty per cent of people born between 1942 and 1951 (early baby boomers), owned homes by age 25-34.
  • This dropped by 15 percentage points to 45 per cent for those born 1982 to 1991.
  • Older Australians
  • Uniform distribution – dwelling type which tends to exist classified, more likely to be on a house on a full block and more than probable to be in a business firm above the median.
  • Less of those types of properties beingness sold, meaning younger families need to live further away from where they piece of work – CBD
  • Under-utilisation – most people prefer to stay in their home, even when they have multiple bedrooms – eg: 2 people living in a four-bedroom house.
  • What causes people to stay in their long-term home?
  • Revenue enhancement burden – disincentive for them to sell
  • Ease of trading – vacate, moving out, demand fourth dimension, information technology's not like shooting fish in a barrel to practise.
  • In markets like the one nosotros're in now, its difficult for upgraders and downsizer to take activity – fear of selling and existence home less, or buying and non being able to fund the movement.
  • eight out of 10 people desire to stay where they were – comfortable, friend and family, electric current habitation suits them best.
  • Elephant in the room – selling could affect the age alimony eligibility
  • Difficulty in obtaining finance later on in life – If you are downsizing, but y'all haven't paid off your mortgage, how does it work – look at super and other forms of income when you retire. SMB needs to show the plan and exit strategy – there is a way that you tin can extinguish the debt at some point in retirement.
    • Selling an investment to pay downward debt on the dwelling house – if at that place is enough disinterestedness
    • Downsizing programme
    • Power to show you can pay the debt and still have enough superannuation left over to fund a reasonable lifestyle.
  • Rightsizing v downsizing
  • May downsize the g or the internal floor area, only not necessarily downsizing the budget.
  • Some may have a second dwelling – tree or sea change, plus an inner-city pad.
    • Lock and exit inner ring pad
    • Superb apartment with all the luxuries
    • Move to the metropolis to enjoy all that the city offers – exist close to the aerodrome plus hospital and care.
  • It's at present more of a side step, and so a downsize.
  • Inheritance
  • Some baby boomers are getting a little nest egg or a large surprise.
  • They are making the decision to relish the years, they want to use it wisely and brand sure they have a fantastic residuum of their life.
  • baby boomer – 57-75 – 85% of aussies who do rightsize, which is virtually 2 to four people out of 10, plan to do then before seventy. 13 more years of baby boomers to sell up, this will be the greatest intergeneration transfer of wealth that we'll ever see, either sold or handed down over the next 1 to two decades.
  • Traps
  • You lot don't desire maintenance and a renovation project. Once the kids have moved out, they may become out and buy furnishings that make them feel good about their home.
  • What they could practise, is go excited almost buying off the plan – they could purchase a bad asset. If they're excited virtually picking their colours and fittings, that's swell, simply they're non thinking about how that asset volition perform. If they want to hand something downwardly to their kids, that may non be the all-time.
  • Long sunset on off the plan, tin can take a while to
  • Government incentives
    • State postage duty relief,
    • Super contributions beyond current concessional limits,
    • NSW abolishing stamp duty argues land taxation proposal would help rightsizers.
  • None of these initiatives deals with the major financial impediment to rightsizing.
  • Most dwelling-owners are on some form of pension, the assessment of which excludes the value of the habitation. Selling upwardly, and turning the domicile into a financial asset, can reduce the pension and ultimately increase the contribution to aged intendance.
  • Nor do they address the plethora of non-financial drivers. Homes are far more than assets to be monetised. They are anchors for life, full of memories, a base for family, and shut to friends and well-used facilities.
  • 2003 had the virtually belongings sold – this was the last fourth dimension baby boomers had to merchandise up to a bigger domicile – highest level of turnover

Golden Nuggets

David Johnston – The Property Planner'south Golden asset: We have an ageing population. From the years 2000 to 2020 – the proportion of the population aged 65 years and over and therefore nearly retired, increased from 12.4% to 16.3%, expected to be a quarter of the population by 2060. There'due south less people working, less people contributing to tax and less money to go around to support our nations growth. Getting the policy settings correct is really important, it will help alleviate social problems and help brand property more affordable for those coming through, who are having families currently and planning to have families into the hereafter. Information technology's really important area of policy that needs to exist idea deeply about and get right to set ourselves upwardly for continued wealth and prosperity, as the baby boomers have been fortunate enough to live through and certainly create, for those of u.s. Gen X and millennials, who have come later on the wonderful babe boomers.

Cate Bakos – The Property Heir-apparent's Gold nugget : For people who are thinking about development, accept a really good think about the area and whether at that place is need from infant boomers. Expensive suburb in middle or inner band, recollect virtually how you will future proof it so information technology volition attract them. People are looking for longevity – think most the floor plan and all the things that grandparents want – split play area, low maintenance, bedroom on ground floor. Single level or avoiding stairs for daily tasks is very important.

Weekly market place insights

  • Latest unemployment figures exceeds expectations. In the latest figures released by the ABS, the unemployment rate has come up down to 4.9% in June from 5.1%. The last time we saw unemployment this low was in June 2011. On the other mitt, underemployment has increased to 7.9% in June (from 7.4% in May). Information technology'south likely this was caused by the extended lockdown at this time in Vic. Notably, Vic has the lowest unemployment charge per unit of all the states and territories, with unemployment at 4.40%.

  • Time to buy a dwelling alphabetize shows slight improvement. The 'Time to buy a habitation' index produced by the Westpac Melbourne Constitute has shown an increment of 0.8 points to 96.9 from June to July. Although an improvement, it is still in negative territory, with the alphabetize down essentially from its peak in November 2020 of 132 points. The consistently weaker trends likely reflect concerns about the impact of sharp toll increases on affordability, especially amongst prospective start domicile buyers and owner occupiers.

  • Lowest vacancy rates nationally since May 2011. National vacancy rates recorded by SQM enquiry prove the economy continues to move in a very positive direction. The vacancy rate cruel from 1.eight% in May to 1.7% in June, which is the everyman vacancy rate since May 2011. The Sydney and Melbourne CBD apartment market besides shows positive steps to recovery, with Sydney falling 0.5 to 6.iii% and Melbourne falling 0.three to v.8%. Information technology is off-white to mention that despite the oversupply of CBD apartments in our two capital cities, the overall vacancy rate is extremely tight and is illustrating a growing concern for the plight of renters.

  • NSW relief packages for residential landlords. In an effort to assistance NSW residential landlords, a grant of $one,500 or country revenue enhancement reductions are bachelor for landlords who come to an understanding with their tenants to decrease rent, to assist with reduced incomes due to Covid. The trio discuss the merits of this policy, which is able to beginning some of the loss that generous landlords are shouldering.