March 30, 2010

AUSTRALIA: Fortunes to change hands as boomers hit the home stretch

. SYDNEY, NSW / The Australian / Business / Property / March 30, 2010 By Lanai Vasek, The Australian MORE than $400 billion of housing stock will change hands in Australia over the next 15 years as the parents of the baby boomers, and then the boomers themselves, shuffle off the mortal coil and leave their property to their children. It will be the biggest intergenerational wealth transfer in Australia's history, according to a report released yesterday by Bankwest. Rising property prices, an ageing population and high home-ownership rates are expected to boost the pick-up in housing inheritance as a large number of "veterans" (people now aged 70 and above), followed by the boomers, succumb to old age and pass on a vast pool of property assets to their adult children. The transfer could create a new wave of prosperity but may do nothing to alleviate the supply-side bottlenecks plaguing the housing sector and driving up prices for home buyers. The Bankwest Financial Indicator Series report says one in every 10 Australian homes will be given away by 2025, representing an "unprecedented baton change in intergeneration wealth". Bankwest Retail chief executive Vittoria Shortt said the research forecast a 95 per cent increase in the number of estates with housing assets by 2025. "Baby boomers and generation Xers are likely to be the main beneficiaries, which should help to fund their retirement plans and consolidate their financial positions," Ms Shortt said. Those in capital cities would realise the biggest gains from housing inheritance, with the largest projections for Sydney ($113bn), followed by Melbourne ($86bn), Brisbane ($33bn) and Perth ($33bn). Real Estate Institute of Australia president David Airey said while the transfer of wealth was "significant" it would not help ease supply issues in the housing sector. "It will simply be making those people who inherit these assets very wealthy," Mr Airey said. Ms Shortt said there were still some factors that could reduce housing wealth projections, including aged-care costs and older people extracting equity from their homes. "It's no secret that many boomers are determined to cling to a lost youth," she said. "They might decide to sell their property and go out with a bang, rather than sit on a huge asset and pass it on to their adult children." Combined Pensioners and Superannuants Association policy co-ordinator Charmaine Crowe said if the cost of aged care continued to grow, many older home owners would be forced to sell their assets, reducing the amount passed on to children. "Most people are paying on average a $200,000-$300,000 bond just to get into aged-care facilities, with some paying up to $1 million," Ms Crowe said. "If costs keep growing, which we expect they will, then the reality is not all of this wealth will be passed on to younger generations." [rc] Copyright 2010 News Limited.