Is housing the key to a successful retirement?

The document explains the government’s plans to enshrine the objective of superannuation fails to consider the pressing challenges national retirement support systems are expected to face from ageing population and declining rates of home ownership. 

Citing the 2021 Retirement Income Review, REIA president Hayden Groves acknowledged that home ownership is a “fundamental pillar of successful retirement, supplemented by superannuation and other income.” 

Revealing retirement renters exhibit higher levels of stress than home owners in the same bracket, the review found “many stakeholders believe home ownership should be a pillar in its own right given its significance in influencing the wellbeing and the adequacy of a retiree’s income.”

It added that “the retirement income system does not appear to be delivering an appropriate standard of living for many retiree renters.” 

Home ownership rates declined by 8 per cent for individuals aged 50 to 54 between 1996 (80 per cent) and 2021 (72 per cent). While similar declines, albeit over a larger period (1971 to 2021), have been reported in those aged 30 to 34 (from 64 per cent to 50 per cent) and 25 to 29 (50 per cent to 36 per cent.)

The Retirement Income raised these receding home ownership rates as concerning, as they inevitably lead to larger cohorts of retirement renters and, therefore, greater financial strain in post-work life.

Mr Groves also stressed that the concept of home ownership as a pillar of successful retirement “will become more important [as] our nation deals with the economic, social, and ethical implications of an increasing ‘greying population’ that will be seeking access to their superannuation.”

Key factors driving this growing trend include soaring residential property prices, which jumped nearly 30 per cent between September 2020 and April 2022; later workforce entry; delayed household formation; and declining housing affordability.

“Unless trends to declining home ownership are addressed, superannuation and additional government support will have to step up to support an increasing cohort of retiree renters,” he warned. 

In his eyes, a broader approach to ensuring a successful retirement offers a potential solution. 

“We strongly urge the Australian government to not simply legislate an objective of superannuation, but to carefully consider all factors of a successful retirement, not simply compulsory superannuation, including access to superannuation funds for housing acquisition,” he said.

The REIA’s recommendations include:

-   Retirement outcomes for Australians be considered holistically in defining an Australian superannuation objective. Conditions around “preserve savings” should be broadened and reworded to identify the best possible and most successful retirement outcome.

-   Superannuation should continue to support and consider expanding providing support for first home buyers, as with the voluntary First Home Super Saver Scheme, and examine successful schemes for young home buyers in Canada, New Zealand, and Singapore given home ownership’s well understood role in a successful retirement.

Mr Groves said, “Providing flexibility and a holistic view of retirement income, savings, and accommodation is needed that responds to rising challenges Australia as a nation is experiencing.”

Such challenges include those posed by the significant demographic transition identified in the REIA’s submission document as people in the Baby Boomer generation reaching 65, which “has already driven a rapid fall in the ratio of working-age people to those over 65 through the past decade, which will continue for the next decade.”

“The role of superannuation funds could be expanded so they are not simply the guardians and gatekeepers of compulsory retirement wealth,” Mr Groves concluded.