According to a new report, if you don’t buy a home by the time you reach your late 40s, it is likely that you will probably never own one and become a life-long renter
. But that’s not the only thing to worry about.
By not purchasing a home by your late 40s you are also more likely to be significantly poorer too and suffer financially in retirement.
A paper released by the Swinburne University found that Australians who do not purchase a property by the time they are 45-49 years old, will face financial stress in the lead up to and throughout retirement.
This comes as a worrying realisation to many young Australians (also now known as “generation rent”) who are already priced out of the Australian property market, with little chance of becoming a first home buyer, let alone a wealthy property owner.
Sydney buyers in particular are the hardest hit where property prices are the highest in the country. The city is now turning into a rental market, where more residents are likely to still be renting by the time they reach retirement. This places increasing pressure and financial stress on renters with the Australian retirement income system presuming that retirees will own a home outright. However, this research says otherwise.
“Housing is probably the key way of generating wealth, but people who are unable to purchase or fall out of home ownership will find that they don’t have as much wealth in retirement,” research author Andrea Sharam said.
The paper showed that if you have not purchase a property by the time you are 45-49 years old, there was a strong likelihood that you would not purchase property after this time and end up being a life-long renter.
Andrea Sharam has also called for the capital gains tax concession to be axed alongside the reinstatement of death duties, or a small inheritance tax. She states this will help reduce the so-called widening wealth gap between homeowners and non-homeowners. However, not everyone believes this is the way to go.
Education also plays a vital role in the likelihood of owning a property. The more educated you are about the property market and the more you understand about it, the more likely you are to utilise property to reach your goals. Buying property isn’t all that difficult, and generally provides a far safer method of investing compared to shares for example. If you want to live a comfortable retirement, then owning a property can put you one step closer to this. Also knowing that you could be significantly poorer and suffer financially in retirement could be enough to get younger people acting now.
According to the paper, an increasing number of older renters are already experiencing housing insecurity and impoverishment. Approximately 426,000 Australians aged over 50 years live alone or with a partner in private rentals. However, the population projections scarily suggest that there would be as many as 832,319 renters over 50 years by 2050.
Not only will this put increasing pressure on older people on low incomes, but it will also put high amounts of pressure on the current pension system as well as the rental market. Older Australians have an estimated 85 per cent of home-ownership, whilst the number of first home buyers have halved in the last decade, according to the latest ABS data.
The paper also highlighted that those in the older age brackets, particularly those between the ages of 65 to 69, the wealthiest segments were those who owned both their own home as well as other properties. However, the net wealth of these owners fell between 2003 and 2013, most likely to do with taking on more debt to leverage other properties.
So how we can narrow down the number of life-long renters? Some policy recommendations were mentioned including increased investment in social housing, and tax policies that discourage people from buying property for capital gains only.
“Because that’s just creating house price inflation, which makes it hard for people to enter into home ownership in the first place,” Ms Sharam said. “These people have been given a lot of public money in effect [from tax breaks], so its entirety reasonable that they could give some of it back at the point in time where it does not hurt them and their heirs, and it goes into social housing.”
So, how do you buy a property before you reach your late 40s and avoid becoming a life-long renter? Here are 10 ways you can get ahead now:
- Start young – the earlier you start, the more time you have
- Save as much as possible every week or month
- Get educated in the property market and know the best areas to buy
- Become an investor first before buying your own home to live in
- Buy off the plan to take advantage of the first home owner grant and other concessions
- Ask your parents for help
- Buy with your partner or friends
- Talk to an expert Property Consultant such as iBuyNew
- Know what your goals are and map out how many years you have until retirement
- Stay at home for longer to save rental money for a deposit
Can you still borrow over the age of 40?
If you’re over the age of 40 and have yet to buy a property, there’s still time to do so. Although you can still borrow money from a lender or bank over the age of 40, it can start to get harder.
Lenders might start to become curious about your situation and may ask more questions about why you haven’t bought a property before. As long as you can show lenders where you’ve been spending your money and have a clean record when it comes to paying bills on time and you have no debts, then they will usually be more understanding.
Bear in mind though that the loan may need to be repaid over a shorter amount of time, such as over 15 years instead of 20 years, to reduce the likelihood of paying down a loan come retirement. Older borrowers may also need an exit strategy and can face tougher guidelines to ensure they can repay the loan. With stricter lending conditions already in place, adding an older age into the equation can give you a disadvantage due to there being a higher level of risk. However, it’s best to speak to a reputable Mortgage Broker who can advise you further with this.
To learn more about how you can buy a property today, no matter what age you are, and avoid being a life-long renter, it’s best to get in touch with the team at iBuyNew. Our expert Property Consultants can guide you through the property process smoothly and get you on the property ladder sooner rather than never.
Call us on 1300 123 463
to find out more.
Published on 10th of October 2016 by Marty Stanowich