How delayed retirement affects property
by John McGrath
The lifestyle choices we make have a direct impact on the property market.
Young couples delaying marriage and family are contributing to rising apartment prices. As families grow, they often need to upsize and this creates demand for family homes. And as people retire, demand is created for lower maintenance properties in lifestyle locations either in our cities or in coastal areas.
But what happens when our ageing population suddenly decides to delay retirement?
According to recent media reports, a record number of Australians aged over 55 are remaining in the workforce or are actively looking for work following superannuation losses during the GFC. Baby boomers are just beginning to turn 65 now, with three million Australians currently in the 65-plus age bracket. That’s going to jump to 8.1 million by 2050. So if they’re going to delay retirement, how will this affect the property market?
I think the likely scenario is a short-term impact. As soon as older Australians have replenished their savings and their super, they’ll feel more comfortable about retiring, which in turn will lead to a decision to sell and downsize to a sea/treechange location. Those relying on the stock market to recover may need a few years, so I’d say we’ll see fewer retirees making the sea/treechange in the short term as more people remain in the workforce.
What about downsizing? Downsizers are generally made up of two groups – empty nesters who are still working; and retirees or those intending to retire very soon. Among the empty nesters are those seeking luxurious properties in harbourside or beachside areas as well as those seeking more modest properties.
In today’s market, home owners who don’t need to sell are choosing to wait and many empty nesters fall into this category. They might like to downsize, but they don’t need to move so they’re staying put for the time being and waiting for the market to recover. The downsizers will be back when the market is stronger.
What about the flow-on effect? If we have fewer empty nesters downsizing or retiring for a period, does that mean we’ll see fewer family homes offered in the marketplace?
I think we’ll always have a good supply of family homes, but if a generation of family homeowners decides to delay retirement then yes, the supply of family homes might tighten somewhat in the years ahead. A lot will depend on the stock market recovery. If older Australians can get back some of their savings over the next five years, the delay in retirement that we’re seeing right now might be temporary and therefore not enough to cause a long-lasting market impact.
So what do you do if you’re going to stay in the workforce for a few more years but you’re ready for the sea or treechange? At McGrath, we’ve been noticing a new trend in Sydney executives selling and moving to lifestyle areas with fast commuter access back to Sydney. Advances in technology are allowing them to work from home a few days per week and improved transport links are enabling easier commuter access back to Sydney from areas such as Bowral, Port Macquarie and the Blue Mountains.
From a financial perspective, this is very clever. These executives are still earning Sydney incomes but their costs of living are likely to be lower in a regional area. And so is the cost of property.
Say you sell for $2 million in Sydney. In the Blue Mountains, you can buy a good quality home in the $300,000s to $400,000s. Want luxury? Then you’ll need to spend maybe $600,000 to $700,000. In Port Macquarie, you can buy luxury in the $400,000s and $500,000s. And this leaves plenty of money for a bolthole investment property in Sydney for those overnight stays during the week!
Published: Wednesday, November 09, 2011blog comments powered by Disqus