What are the property implications of an ageing population?

Australia’s population is ageing.  A larger percentage of us are older than ever before in our history.  While we hear a lot about the burden caused by an ageing population on the economy, but there is not much discussion about the property implications of this trend. Typically, as householder’s age, mortgage levels decline and outright home ownership increases.  After all, we’ve been earning an income and paying off our debts.  But as our home equity increases and we become more financially secure, our life objectives are also changing.   We may be contemplating reducing our work to a couple of days a week or perhaps retiring.

As a big family home is no longer a priority, we might think of trading down and reducing the financial pressures to work.  However, there’s a hitch . . .

If you are in the top 25% of wealth in Australia, sure you can buy an apartment in the same or a similar area because the value of your dwelling allows it.   The difference in price between the home you are selling and the new one you are moving to means you don’t need to put any additional money into the purchase and you might even be able to pull some money out.

But for 75% of Australians, that’s just not true.  Even to buy a new town house in their existing area will cost more than their current dwelling.

old couple

One of the big issues in this country is insufficient housing product and insufficient lifestyle alternatives to allow people to effectively trade out or trade down.

As a result, we have the emerging problem that people who want to ‘age in place’ - that is, continue to live in the communities in which they have raised families and developed social networks - don’t have access to the kinds of retirement living opportunities they require e.g. continuing to work. If we look at independent living units such as those in traditional retirement villages, there has been no growth in market share in that sector for 20 years.  The ageing population is growing but the housing market to service this group has remained relatively stagnant.

We are beginning to see some responses to the problem.  What has begun emerging is the new market entrants and major existing development companies seeking to increase supply. In addition manufactured housing estates, where retirees can purchase the building they will live in but they only lease the land are providing more choice.  Typically, Commonwealth Rent Assistance will pay for the leasing component.

One of the interesting trends we’ve observed is that the, so-called ‘sea change’ or ‘tree change’, where older people move out of the cities, opting for a quieter life on the coast or in the country, has absolutely come to a halt. In fact, it’s started to reverse.  Older people want to be closer to the cities and to health services that they increasingly require. Further city proximity has to do with the delay in retirement age primarily as retirees wish to continue to work. This has created a new market for apartments and units for households wishing to down size pre-retirement – if they are affordable.

The latest Australian retirement intention survey indicates that people want to put off retiring until the age of 70.  They want to keep working, even if in a reduced capacity.  And if you want to keep working, you need to be close to jobs.  Unfortunately, in areas that promise that enticing sea change - there are no jobs.

We are seeing massive shifts in the housing and lifestyle preferences of older people.  What we are not seeing is innovation in the market in types of housing and tenure of housing to provide the kind of lifestyle opportunities that retirees would like and pre-retirees would like.

About the author:

Brian Haratsis is MacroPlan’s Founder and Executive Chairman. Brian is an economist and future strategist with over 30 years experience as an advisor to governments and major corporate clients throughout Australia and New Zealand. For more information or to discuss your property research requirements, please contact Amy Williams on 02 9221 5211 or amy.williams@macroplan.com.au.