Study: one in four to retire without owning home

A comfortable retirement could be “crumbling” away from one in four Australians who are being locked out of the property market by rising housing unaffordability, says new research from an industry super fund.

The data, compiled by REST Industry Super, estimated that 85 per cent of retirees currently owned a home, but that would fall to 80 per cent in the next 15 years, and then drop to 75 per cent by 2036 – meaning one in four would retire without owning a home and would be forced to rely on other savings and investments.

Given that 78 per cent of retirement savings comprise a home and other property assets, REST CEO Damian Hill said the new figures showed that one of the three key pillars of the national retirement income policy was being eroded.

“The problem with this is that so much financial advice and policy has been developed around the assumption that people will own their home when they retire. While home ownership has long been one of the key pillars of Australia’s retirement income policy, it is certainly showing signs of crumbling,” said REST CEO Damian Hill.

“While some young Australians are consciously deciding not to purchase property, many others want to buy a home but are unable to because of the reduced affordability of housing, especially in the capital cities.”

Home ownership rates have been stable at about 70 per cent for decades, and the needle had not moved by 2008, figures from the Australian Bureau of Statistics show.

The US, UK, Canada and New Zealand have similar rates, while those of Italy, Spain and Poland are between 82 and 96 per cent. By retirement age, 80 per cent of Australians usually hold title to residential property.

In 2007/08, 78 per cent of those aged over 65 owned their home outright, while five per cent were still paying a mortgage. REST defined home ownership as either owning or paying a mortgage on their primary place of residence, but excluded investment properties.

Lower housing affordability and higher interest rates dragged home ownership rates among Australians under 35 years down from 45 per cent in 1995/96 to 37 per cent in 2007/08 and was on track to reach just 33 per cent this year, REST said. Savings and superannuation form the other two pillars.

By 2007, only 12 per cent of Australians aged between 25 and 34 years did not have superannuation coverage, REST says.

Of those who did, 27 per cent had a balance above $25,000. Among 35 to 44-year-olds, the median balance was $32,283 and almost half were completely reliant on employer contributions to super. For those aged between 55 and 64 years, the median balance was $70,000.

AAP with BusinessDay