In the past, it’s been commonplace for young people to purchase starter homes early in life. The thinking is that if someone can obtain a home in their 20s or even 30s, they can realise benefits of increased value over a longer period of time and trade up to larger pieces or property with more speed.
Conventional wisdom says that the major benefit of purchasing a home at a young age is that eventually, you can pay off your entire mortgage, thus having no house payments. This is in contrast to renting in perpetuity, which means that you’d always have a monthly rental check to write to a landlord, even at retirement age.
However, trends in Australia are shifting. Now, many Australian citizens are purchasing their first home much later in life, meaning that they’ll be saddled with a mortgage payment well into retirement.
The Shift in First Home Purchases in Australia
The Australian Bureau of Statistics released a report in January highlighting this changing trend. Recent data shows that in 2000 - 2001, roughly 60 percent of all Australian homeowners purchased their first home between the ages of 25 and 34. This is in line with the conventional wisdom outlined above.
However, the Bureau of Statistics found that this number has fallen below 50 percent in 2013 - 2014. This means that the number of people purchasing their first home between the ages of 25 and 34 has declined by more than 10 percent over a 12-year period. Additionally, the number of Australians buying their first home between the ages of 35 and 44 has increased 6 percent from 2000 - 2001 to 2013 - 2014.
In 2000 - 01, for example, 18.9 percent of homeowners purchased their first home between the ages of 35 and 44, compared to 26.2 percent in 2013 - 14.
The result in this changing trend is that Australian citizens are still paying off their initial mortgage after retirement age. Statistics collected by the Bureau show 8.2 percent of households aged 65 or older were still paying off their mortgage in 2013 - 14, up from 3.6 percent in 2000 - 01. This trend is expected to continue as Australians begin to purchase homes later in life.
Australian Retirement Snapshot
The 2016 PWC / Property Council Retirement Census, which provides data for the retirement living sector, shows that retirees are retiring later in life. This could be due to the fact that more and more Australians are paying off their mortgage past the age of sixty-five.
The age of retirement residents into retirement communities has risen to 75 from 74 last year. Further, the average age of residents in retirement communities rose to 80 years old. However, according to the Census, the sector believes that retirement communities provide a cheaper alternative to homeownership for people reaching retirement age, and that more and more people will seek this alternative.
It offers retired people who may be saddled with mortgage payments the chance to downsize and pay a price that’s 67 percent of the median home price in the same postcode.
Would you like to learn more about property trends? If so, our 'How To Property Invest' blog is full of useful hints.
