Housing report reveals need for government to act carefully
THE mobility and downsizing behaviours of Australians aged over 55 have been put under the microscope by the Australian Housing and Urban Research Institute (AHURI).
In its recently published report Moving, downsizing and housing equity consumption choices of older Australians, the researchers found the issues of downsizing and the lock-up of wealth in housing assets will become more pronounced as the number of older Australians increases and the number of people working decreases.
The AHURI report describes the nature of the downsizing decisions along with the facilitators, barriers and consequences of those decisions.
The key report findings, which were derived from the Survey of Income and Housing, the Household, Income and Labour Dynamics in Australia Survey and the Australian Census Longitudinal Dataset were:
- Few aged over 55 move homes on an annual basis. Geographic mobility declines with age and is higher among renters-varying from 3% per annum among owner-occupiers aged 75 years and over, to around 18% among renters aged 55-64 years.
- An analysis of barriers to geographic mobility highlights the majority of individuals report either health or affordability as the primary barrier to moving.
- Downsizing behaviour is generally correlated with specific life events such as change in partnership status, adult children leaving the parental home, or change in health status.
- Evidence suggests that the Aged Pension assets test, but not the Aged Pension income test or age eligibility rules, discourages downsizing.
- Both geographic mobility and downsizing are associated with an increase in financial and life satisfaction, but a decrease in housing and neighbourhood satisfaction.
- Negative impacts of moving on wellbeing, as measured by satisfaction, appear to moderate over time, potentially reflecting individuals' adaptation to their new living arrangements.
The report writers identify the critical concern of whether and by what means older Australians can adjust their housing so that it matches their "housing and non-housing needs at a critical part of the life-cycle".
They found that over the last 50 years the dominant form of housing has been owner-occupier. Generally, and up until the early 2000s, this has led to retirees being mortgage fee. This the researchers found is changing as more retirees are still facing mortgage debt but are encouraged to age in place.
"Given the maturation of the superannuation system and the rules embedded in the current Aged Pension system, this has potential implications for older Australians, who will face a number of decisions upon retirement," the researchers conclude.
"Households that have not paid off their home could, for example, choose to transfer assets across their portfolio at the time of retirement to eliminate their mortgage debt.
"By doing so, individuals and households could potentially maintain access to the means-tested Aged Pension. Alternatively, they could choose to reduce or eliminate mortgage debt by downsizing. How retirees' decision-making behaviours in this area evolve over time may have important implications for government finances and the sustainability of the tax and transfer system."
The researchers suggest that for government policy changes to be effective, they must be made with considering the life-cycle needs of older Australians.
"Australians who are currently retired or near retirement have made saving and consumption decisions based on a set of tax and transfer parameters that should only be altered with careful consideration of the consequences.
"To make a meaningful difference to behaviour and outcomes, policies must be well thought-out, pre- announced to allow for forward planning, and supported to remain in place long term." the report states.
To read the full report, go to ahuri.edu.au/research/final-reports/321.