HILDA points to the home

The big news from this week’s latest Household, Income and Labour Dynamics in Australia (HILDA) survey is that the proportion of homeowners is declining, with fewer young people owning homes than ever before.

Slightly lost in the data buzz was the fact that the groups who have seen the biggest increase in their wealth over the past 12 years are (roughly in order): elderly couples, followed by elderly men and women. The groups that have done worst? Lone parents, single men and women who are not elderly.

The reason for this is housing equity. The groups that have a lot of it (retirees) have done well; those that don’t own homes are treading water. While home ownership fell among every age cohort under 65, retirees’ homeownership remains basically unchanged at 75%.

Although this HILDA module shows a slight decline in average home values between 2010/11 and 2013/14, it is worth noting that between May 2012 and May 2016, house prices increased in Sydney by 57% and Melbourne by 40%. These increases will feed into the next HILDA wave.

Median home equity not only increases across each age cohort, but the percentage increase in the value of that home equity increases too. Those over 65 have seen a 52% increase in the value of their home equity over the past 12 years, yet those between 25 and 34 actually lost 8%.

This increase in housing wealth among retirees has occurred in conjunction with increases in pension costs, as retirees continue not to use their wealth to support their retirement. HILDA again lays bare that the reverse mortgage market is completely underdeveloped, estimating that reverse mortgages make up a fraction of 1% of home loans.

Younger workers are being locked out of the housing market, yet being expected to pay increasing pensions to retirees whose wealth has soared.

This situation needs remedy. The answer is for the home to be included in the pension means test, together with a government backed reverse mortgage product that encourages retiree households to translate their wealth into higher living standards.

HILDA again shows us that the home is the answer to the ageing population.