It’s becoming clearer that housing affordability, particularly in Sydney and Melbourne, has wider implications than just for those trying to get a foot on the property ladder.
Skyrocketing house prices are increasing the gap in living standards in retirement between those who own the property they live in and those who rent. And the gap is likely to widen.
Home ownership in retirement is important not only because the retiree is not paying rent or making mortgage repayments but because of the privileged position it has within the tax and superannuation systems.
Not only is capital gains tax not paid on the sale of the family home, but it’s not counted in the assets test for the age pension.
The penalty in lifestyle in retirement from not owning a home is greatest, not surprisingly, in Sydney and Melbourne, where house prices and rents are highest.
The Association of Superannuation Funds of Australia (ASFA) figures show a Sydney home-owning couple needs to have saved about $640,000 to support a “comfortable” retirement from age 65.
Sydney retiree couples who rent need about $1.17 million – or more than half a million dollars more!
Melbourne retiree couples need about $1.12 million for a comfortable retirement from age 65.
However, a Melbourne home-owning couple needs to have saved $650,000, or $10,000 more than their Sydney counterparts…(continues)
SOURCE: John Collett, “Renters need $1 million for comfortable retirement”, The Age, 28 March 2017
BroCAP is produced by the two librarians at the Brotherhood of St Laurence in Melbourne, Australia
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Produced by the librarians at the Brotherhood of St Laurence in Melbourne, Australia