The future of Australian property prices

[Vixs]

You're rather missing the point. We have an aging population and the demand on the remaining taxpayers in paying for the age pension will become unmanageable.
The whole idea of compulsory saving in Super is to provide an income to retirees in order to avoid this sort of massive drain on the taxpayer.

If you're going to continue to allow entire Super balances to be spent, why would you offer the current tax advantaged status of Super? If people can just save X amount and then spend it all before accessing a full age pension, you might as well wipe compulsory super and let them pay tax on those savings at their ordinary marginal rate.

I understand that the purpose of superannuation is to take the pressure off the aged pension. What I'm saying is, if people retire, spend up like kings for a few years and are left with nothing but the 20k p.a. pension, their poverty should be the advertisement for what not to do.

Dependency on an income stream you have NO control over should frighten anyone. If the burden on the budget from the pension is too large, we'll see lower indexation, tougher qualification criteria, inclusion of PPRs in the assets test etc. All things that are to come anyway as retirees leave the workforce with a healthier super balance - just hastened in order to take the pressure off the budget.

To FxTrader's point about inheritance - people's children can feel what they like about inheritance. The attitude towards leaving an inheritance is already changing. Besides, a family in their late 40s/early 50s need inheritance money much less than families in their 20s and 30s could use a hand with a house deposit and education expenses.

The elderly should be downsizing and moving out of working suburbs into areas with better access to lifestyle facilities and healthcare.

Buy a townhouse or a villa and get rid of the 4 bed 2 bath homes they raised their families in. Use the surplus funds to top up their super or fund healthcare and aged care expenses. Give another working family the chance to live there rather than commuting for 90 minutes each way. If the house/land is something they want to keep in the family for generations to come, sell it to their children.

The means are there, the fact that people don't want to use them should be their problem.

Ultimately all of those thoughts are brought on by the fact that I am losing incentive to contribute money over and above SGCs with every budget, as governments of all brands can't stop poking the sore tooth that is the pile of cash in super funds.

 

[Mrmagoo]

As they're currently doing, flood the market with highrise units. Young people move into these units and out of houses, creating much less demand.

Bet your bottom dollar all the oldies will do whatever they can to stop this happening but it already is basically everywhere apart from Sydney..

 

[Julia]

There is another dimension to this issue not often discussed. Their kids/heirs don't want them to sell, they see that 2 million dollar house as their inheritance and don't trust that the old ladies would be able to wisely manage the cash should they sell (with some justification I might add).

I'm tempted to climb on to the currently fashionable band wagon of screaming 'sexist comment' here, but I'm sure you meant to add that very old blokes would equally have difficulty managing money.
We could just cover the whole gamut and accuse you of ageism.

Adding the family home to the assets test makes sense to me but it would be a huge political risk for any government to propose it.

Agree. But perhaps the family home could only be exempt up to a certain level?

Despite my facetious comment above, you raise a good point about the family wanting to keep the exempt family home with as high a value as possible. The other factor is that a move into most retirement villages involves a deduction of as much as 33% from the entry price when the old person eventually dies and the dwelling is sold.
So not only would the family receive no capital gain regardless of years of residence in the village, the village also keeps a substantial amount of the entry price.

Then in nursing homes I think they can charge whatever they decide in terms of a bond, as long as they leave the resident with something like $30K odd.

So no wonder families are keen to see mum or dad stay in that family home.

I understand that the purpose of superannuation is to take the pressure off the aged pension. What I'm saying is, if people retire, spend up like kings for a few years and are left with nothing but the 20k p.a. pension, their poverty should be the advertisement for what not to do.

You'd think so, wouldn't you. But it doesn't seem to work that way at all. Hence the compulsory saving for Super.
Many people just don't seem to plan ahead at all. A couple I knew had no children, both had worked all their lives, and at retirement all they had was a very modest home (worth less than $300K) and about $30,000 in the bank. So they qualified for the full age pension. Said they'd always just assumed that - because they paid taxes all their lives - they would be properly looked after in retirement.

Just such surprising naivete.

Dependency on an income stream you have NO control over should frighten anyone. If the burden on the budget from the pension is too large, we'll see lower indexation, tougher qualification criteria, inclusion of PPRs in the assets test etc. All things that are to come anyway as retirees leave the workforce with a healthier super balance - just hastened in order to take the pressure off the budget.

Agree in principle but it will be a brave political party that will do this.

 

[Mrmagoo]

Pensioners should be made to sell their homes and perform menial tasks for payment. There should be soup kitchens so they can get food but we should not be funding their lifestyle with a guaranteed pension.

I'd like to see more old people working at KMART and BIG W as house cleaners for a wage rate similar to youth wages.

The pension age really should be a disability pension for when you're physically too old to work !

 

[FxTrader]

I'm tempted to climb on to the currently fashionable band wagon of screaming 'sexist comment' here, but I'm sure you meant to add that very old blokes would equally have difficulty managing money.
We could just cover the whole gamut and accuse you of ageism.

Unfortunately you totally ignored the context of my comment on Bill's statement and the point about the heirs preferences and chose to attack a straw man instead and thus make a useless and stupid comment as a result. The reality is that since women live longer than their partners on average, they represent a larger proportion of single retired persons living alone in the community. Hence Bill's comment about "many old ladies" living in 2 million dollar homes instead of just saying many old people.

You can "accuse" me of nothing other than commenting on generally poor financial literacy of the majority of people in our community including the elderly. Unfortunately the financial illiteracy of many elderly people is exploited by unscrupulous conman in various ways using various methods (well documented on this forum) most of which rely on trusting someone else to manage one's life savings. Many of these people are then forced to draw an age pension as a safety net.

On one hand you think it nonsensical to live in a large expensive home and draw a pension, on the other hand it's ageism or sexism to suggest that perhaps that's because they are not financially literate enough to know they have better options or their heirs don't trust them to manage their own financial affairs. Why not pause and look at context before shooting from the hip and making asinine accusations.

 

[Macquack]

Pensioners should be made to sell their homes and perform menial tasks for payment. There should be soup kitchens so they can get food but we should not be funding their lifestyle with a guaranteed pension.

I'd like to see more old people working at KMART and BIG W as house cleaners for a wage rate similar to youth wages.

The pension age really should be a disability pension for when you're physically too old to work !

Care to explain your personal situation so we can put your comments in context?

Expecting elderly people to work for youth wages, you must be kidding?

 

[Junior]

I don't think any government of this country will ever scale back Age Pension benefits in any meaningful way. Political suicide. Unfortunately it will only happen when this country is running giant deficits and we have no other option.

They will however, continue to find sneaky ways to chip away at large super balances. Look at the recent proposed changes for SMSFs.

Edit: I don't think Age Pension benefits should be slashed, but the system overall should cost a lot less and be scaled back over time as the number of retirees benefitting from years of Superannuation Guarantee grow. Not including the primary residence is crazy. You can live in a $1million home and claim full age pension. Easy to downsize to say a $500,000 home and become partially self funded.

 

[Mrmagoo]

Care to explain your personal situation so we can put your comments in context?

Expecting elderly people to work for youth wages, you must be kidding?

As they're old and frail they'll be less productive. For example, a $8 an hour award wage for a 70 year old will allow employers to hire them it will also allows households to employ, for example and elderly house cleaner or baby sitter, so that tax payer do not need to increase the pension, businesses get cheap workers and the pensioner more money this is in much in the same way that youth are employed.

Once these people are forced to sell their homes over a certain value (or lose the pension) they'll have even more money available, no need for the pension and everyone in society will benefit.

I think the above is preferable to being unable to work and having to live off an unsuitably small pension.

 

[moXJO]

As they're old and frail they'll be less productive. For example, a $8 an hour award wage for a 70 year old will allow employers to hire them it will also allows households to employ, for example and elderly house cleaner or baby sitter, so that tax payer do not need to increase the pension, businesses get cheap workers and the pensioner more money this is in much in the same way that youth are employed.

Once these people are forced to sell their homes over a certain value (or lose the pension) they'll have even more money available, no need for the pension and everyone in society will benefit.

I think the above is preferable to being unable to work and having to live off an unsuitably small pension.

Are you serious ??

 

[Julia]

Unfortunately you totally ignored the context of my comment on Bill's statement and the point about the heirs preferences and chose to attack a straw man instead and thus make a useless and stupid comment as a result. The reality is that since women live longer than their partners on average, they represent a larger proportion of single retired persons living alone in the community. Hence Bill's comment about "many old ladies" living in 2 million dollar homes instead of just saying many old people.

Oh dear, FxTrader, didn't you read my following post which included the comment to you:

Despite my facetious comment above, you raise a good point about the family wanting to keep the exempt family home with as high a value as possible.

?
I was just having a dig at the ridiculous accusations of sexism and misogyny that are flying in all directions at present. I actually said you made a good point and went on to further agree on various points.

You can "accuse" me of nothing other than commenting on generally poor financial literacy of the majority of people in our community including the elderly.

As I said, it was facetious. Couldn't agree more about the woeful lack of financial literacy, and not just amongst the elderly.

Unfortunately the financial illiteracy of many elderly people is exploited by unscrupulous conman in various ways using various methods (well documented on this forum) most of which rely on trusting someone else to manage one's life savings. Many of these people are then forced to draw an age pension as a safety net.

Yes. And I have made many posts in various threads suggesting it's never too late to acquire some financial nous.

On one hand you think it nonsensical to live in a large expensive home and draw a pension, on the other hand it's ageism or sexism to suggest that perhaps that's because they are not financially literate enough to know they have better options or their heirs don't trust them to manage their own financial affairs. Why not pause and look at context before shooting from the hip and making asinine accusations.

Likewise, dear FxTrader, recognise a facetious comment when it occurs. I value your observations always and could wish that you contributed more often to more threads.

Care to explain your personal situation so we can put your comments in context?

Expecting elderly people to work for youth wages, you must be kidding?

I thought so too, but I suspect Magoo is actually serious.

 

[FlyingFox]

I have been reading the last few posts on this thread and some great points are raised.

Firstly this is my first post. Secondly I may not have the wisdom of many of the members here (and I am not calling you old farts by that ) .

The pension issue aside, and it is an issue because:

1) Many people have treated their houses as an asset over the years but "hoarding" now that they need it in retirement.
2) This is not only becoming a burden on tax payers but also on the young as housing stock in these million dollar suburbs does not move and because of that inflates prices.

I would like to address some of the comments made in the posts before.

1) Something will not continue to happen just because it has in the past. Look what happened to housing in Japan. 23 years ago, the world was a very different place. Australia was a very different place and wages increased significantly with time (more on this later). Do you expect house prices to continue rising? Who will buy these? If 15% of households have incomes greater than 150K, how come a much larger proportion of the housing stock in major cities is priced so high relatively speaking?

Between my wife and I, we earn a decent income and we have no kids. We have saved quite a bit but looking around we can't buy a newish house close (within 30 mins train ride) of the city (Melbourne) without a > 500K mortgage. A colleague of mine just bought a house in Oakleigh for over 700,000 and he will be doing reno's before he moves in. That is not affordable!


2) Wages cannot continue to rise well not at the pace to keep up with or get up to housing. With the current value of the AUS dollar we are perhaps the most uncompetitive country in the world. Do you think wages can increase in the current environment? Even if the dollar drops, relatively speaking which other country has minimum wages of US$20 /hr?

3) This is putting strains on socio-economic conditions. People are moving further out with big commutes. Delay having kids. Not having kids.

The rent vs buy debate also depends on where you want to live. Closer to the city then rent is cheaper (just comparing rent vs interest) than buying assuming you save as well (easy to do the math). As you go further out, then buying is cheaper.

I am not saying property investment is bad. My dad and my father in-law have made a killing out of it but neither of them is looking to expand their portfolios because they realize that returns are **** and capital gains are very uncertain.

If people are treating their house as assets and pouring everything into it to pay off a mortgage (hopefully) before they retire, then it should be treated as an asset. Personally, I don't want to be paying off a (very modest) house at 60 that I bought 30 years earlier.

 

[CanOz]

As they're old and frail they'll be less productive. For example, a $8 an hour award wage for a 70 year old will allow employers to hire them it will also allows households to employ, for example and elderly house cleaner or baby sitter, so that tax payer do not need to increase the pension, businesses get cheap workers and the pensioner more money this is in much in the same way that youth are employed.

Once these people are forced to sell their homes over a certain value (or lose the pension) they'll have even more money available, no need for the pension and everyone in society will benefit.

I think the above is preferable to being unable to work and having to live off an unsuitably small pension.

Its Starcraftmazter!!!!

 

[Mrmagoo]

Are you serious ??

I doubt such brilliance would ever occur. This society is 100% catering to old people and I can't see that changing

 

[CanOz]

It occurs in China and other Asian countries where there is no pension and the earlier generations have not had a chance to bring themselves out of poverty. Most housekeepers are older women, ours is over 60. Most of the hard labor gets done by older men on the building sites, the younger lads won't have it.

It is sad though. You'd think after 40 years of work you could take a break and enjoy life.

CanOz

 

[Ves]

Its Starcraftmazter!!!!

LOL - where did he even disappear to??

 

[wayneL]

LOL - where did he even disappear to??

I believe he emigrated to North Korea.

...I would rather live in North Korea... at least NK doesn't have genetically modified food.

 

[young-gun]

Its Starcraftmazter!!!!

I don't think SCM would take too kindly to that assumption/comparison Canoz Magoo just rattles off troll-like non-sense and outlandish/weird ideas that would never work or be implemented(not necessarily referring to the above).

At least scm was an educated troll.

 

[DocK]

Its Starcraftmazter!!!!

That's exactly what I thought too!

On a more serious note - although I agree in principle with the PPR being included (or at least over a certain value) in means testing for the age pension - there is also the human/emotional factor to consider.

My mother is 82, receives a small part pension and is mainly self-funded. She is a widow living in the same 4 bedroom house that has been her home for over 30 years. It is too large for her, is surplus to her needs and if sold for a more suitably sized (and easier for her to maintain) home would no doubt result in her becoming ineligible for any age pension. Most of the prior arguments are in favour of just such a course, and in theory I agree that downsizing would make perfect sense. However.... What makes sense intellectually is not always what can actually be considered emotionally. My mother's home was a fairly modest home when built over 30 years ago, in what used to be an outer suburb of Brisbane. Due to no fault of her own, it is now in a sought-after suburb and has increased in value substantially. She is emotionally attached to it - it has been her home for many years, she has lived and loved in it, cared for it, spent way too many hours tending its gardens, and every nook and cranny holds precious memories for her. She has developed excellent relationships with her neighbours (important when you are an elderly lady living on your own) and has been visiting the same medical centre, dentist etc for years. It would be a very brave government that would tell her, and her family, that despite having paid taxes all her (and my father's) working lives and having lived within their means in order to pay off a mortgage, raise future tax-payers, and save enough to be almost fully self-funded, that because she's drawing a part pension she must either sell her home or give up the part pension she receives. There would be an outcry the likes of which I can only imagine. It would be absolute political suicide. And to be honest, although I agree it makes perfectly logical sense to means-test the family home, I don't think it's actually fair in a lot of cases.

Another reason my mother has given for clinging to the family home is that she wants to make sure she has enough funds available to fund the retirement villa/nursing home of her choosing, should the need arise. As Julia has pointed out the entire retirement village/nursing home system is tantamount to being a rip-off for the elderly and imo this area needs a drastic overhaul before any govt could consider a move against the ppr exemption for pension eligibility.

 

[Julia]

It would be a very brave government that would tell her, and her family, that despite having paid taxes all her (and my father's) working lives and having lived within their means in order to pay off a mortgage, raise future tax-payers, and save enough to be almost fully self-funded, that because she's drawing a part pension she must either sell her home or give up the part pension she receives.

You've eloquently described the practical v the emotional/psychological considerations of this debate, Dock.

I think most self funded (or almost self funded) retirees are very conscious that it's their own effort over many years which has put them in a position of independence in retirement. It really irks me when I hear someone who has wasted money all their life, say "oh, you're so lucky to have .........". Um, luck had nothing to do with it.

My late father was immensely attached to his quite large house and larger garden where he had about fifty fruit trees. The care of these trees was the main focus of his life, plus the sense of independence in being able to do what he liked when he liked. A major medical event meant he had to go to a nursing home. He absolutely hated it and committed suicide after only a few months there.

 

[DocK]

You've eloquently described the practical v the emotional/psychological considerations of this debate, Dock.

I think most self funded (or almost self funded) retirees are very conscious that it's their own effort over many years which has put them in a position of independence in retirement. It really irks me when I hear someone who has wasted money all their life, say "oh, you're so lucky to have .........". Um, luck had nothing to do with it.

My late father was immensely attached to his quite large house and larger garden where he had about fifty fruit trees. The care of these trees was the main focus of his life, plus the sense of independence in being able to do what he liked when he liked. A major medical event meant he had to go to a nursing home. He absolutely hated it and committed suicide after only a few months there.

I do think that sometimes the younger generations can lose touch with the fact that pensioners are actually real people, who have lived full lives and mostly contributed to our society in one form or another, and are not just a burden on society that we'd be well shot of if given the opportunity.

The security and comfort older people can draw from living in their own homes can be difficult to empathise with if you've never actually owned your own home, or lived in one place for a lengthy period of time. It's probably equally difficult for youngsters to recognise the value older folk place on their independence, or that looking after one's home can provide a purpose in life, as in your late father's case. Like most things in life, it's easy to suggest changes that affect older people if such changes are far-distant from oneself.