- 02 May, 2017
Your Home - how attached are you?
The “Great Australian Dream”, owning your own home – without having the bank as your silent partner.
In 1966, the home ownership in Australia was at an all-time high of 71.4%, since that date the level of home ownership has decreased to 67% in 2011. Maybe the dream is becoming either a little more of a nightmare or it is no longer a dream for everyone.
The debate over home ownership and affordability has raged in the media and between political opponents for months now. We will sit and wait to see if there will be changes announced in next week’s budget, which will address both issues.
Last week PK wrote about issues associated with younger people accessing their super, enabling them to purchase a home. I am not going to revisit the pros and cons of this topic as PK has adequately covered the important issues.
I am going to look at home ownership from an older generational point of view.
For the majority of age pensioners, their home is the largest asset they own and in most situations the most expensive asset as well. The costs associated with owning a home are not minor, from council rates which can be quite high depending on where you live through to water rates, the ongoing maintenance and of course the yearly home insurance premium
For a single age pensioner, with very little other income outside a full pension, these costs can prove quite prohibitive, but in all my years of talking to retirees, suggesting a person sell their home and downsize is normally met with a scowl and that this is not an option.
Why is it not an option?
For a large number of people, the house they currently live in has been their home for a lengthy period of time. It is where they have raised their children; contains special memories; it could be the last place they lived with their spouse who has since passed away; they know and like their neighbors; they feel secure; are very comfortable with the task of travelling to their local shopping centre; their doctor is close by. Finally, the last but not least, the overriding fear, if I have extra cash after selling my home and buying a smaller home would this affect my pension?
If this is the case, how do you make a person move on? To be honest, I have no idea. I am not suggesting that this stay put attitude is wrong, in fact, it is perfectly understandable.
My mum is a classic example, at present, she does still drive, thankfully only to the local shopping centre and the doctors. If mum were to move, she would lose this independence as she would no longer feel comfortable or be confident enough to get behind the wheel of her little car and drive to the shops without getting lost or even worse causing an accident.
Accessing the equity in your home via a reverse mortgage could certainly be an option. But again the fear of making the bank your silent partner again, holding mortgage papers on your house can be a very daunting thought for an older single age pensioner.
Trying to educate and change a person’s mind and attitude who maybe in their eighties in relation to home ownership and the age pension is not easy. However, for a person in their fifties and sixties approaching their retirement, I believe this education and attitude change is a must, going into the future.
I believe that with our ageing population and the massive number of baby boomers all about to turn 65 or older, a person’s principal place of residence which is currently exempt from the age pension assets test will become an assessable asset in determining a person’s age pension entitlement. I am not suggesting this is going to happen next Tuesday night – Budget night.
I am part of the baby boomer bubble, turn 61 this year and I do understand that despite the fact that I have paid taxes all my life, I am not entitled to receive an age pension, regardless of what my total asset pool, including the value of my home is. I do understand that sometime in the future my home which I love, share with my partner and holds many memories will need to be sold to help support and pay my way later in my life
As both PK and I have always said the Age Pension is a safety net, not a right and it does pay to remember that when the age pension was introduced in 1909 the value of your home was taken into account in assessing your entitlement to an age pension.
The Realise Your Dream blogs are written by Peter Kelly and Mark Teale. More information about the authors can be found here