With housing costs on the rise and home loans expanding in size, retirees increasingly have to use their superannuation to meet their mortgage repayments, states a new report commissioned by the Australian Institute of Superannuation Trustees (AIST).
The AIST, which represents all not-for-profit superannuation funds, recently commissioned Saul Eslake, an independent economist and vice-chancellors’ fellow at the University of Tasmania, to investigate the potential impact of rising housing costs on retirees.
The resulting report, entitled No place like home: the impact of declining home ownership on retirement, said there was a marked decline in homeownership among the 35 to 55 age bracket.
Eslake told RN Breakfast he felt the federal government wasn’t doing enough to address the nation’s housing affordability crisis. It was also implementing policies that were making the problem worse rather than helping solve it.
Eslake further stated he thought it was an “intelligent and rational decision” for older Australians to use their superannuation to meet their mortgage repayments. “That's going to become much more commonplace now as more people still have mortgage debt outstanding when they get to retirement,” he said.
The proportion of households headed by people aged 65 and older with housing costs greater than 30% of gross income has nearly doubled, from 5% to 9%, over the last 15 years, according to data gathered from the Australian Bureau of Statistics (ABS). This is partly because more and more Aussies are purchasing and paying off homes later in life due to price growth, said Eslake.
Meanwhile, the proportion of people aged between 55 and 64 who own their own homes but have mortgage debt outstanding has more than tripled to 45%. “They will increasingly use their super to pay off their mortgage debt which means they won't be using their super to fund their retirement incomes and instead will be relying on the pension.”
More needs to be done to address homeownership issues in these age brackets, said Eslake. “One [thing] that might help to make a difference is the suggestion of using the Commonwealth Government's balance sheet to help social housing providers borrow more money in order to increase the stock of housing that can be rented to retirees who don't own their own homes at rents which are fixed at a low proportion of their incomes,” he said.
Eslake said the proposal to allow people to access their super to fund housing deposits, which has since been ruled out by Treasurer Scott Morrison, would simply exacerbate the problem by pushing up house prices.
“I certainly hope that's something they don't pursue in the budget,” he said.
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