Why retirees are integral to tackling Australia’s housing crisis

As the Property Council of Australia recently noted, Australia’s retirement living communities are one of the rare niche markets where throughout the country, affordability remains at an acceptable level of inflation.

The new 2022 PwC/Property Council Retirement Census released in July 2023 revealed that the average cost of two-bedroom Independent Living Unit (ILU) in a retirement village grew by 6.6 per cent over the 18 months to December 2022 to $516,000, while national house prices over the same period rose by 26 per cent to $831,900.

And yet that affordability is under threat, with dwelling occupancy at 90 per cent, considered near full capacity, and a substantial decline in the forecast supply pipeline for retirement living.

As the executive director of the Retirement Living Council Daniel Gannon explained, the market, while currently affordable, is also essentially full as barriers to building are emerging and the projected population of over-65s set to swell.

“It’s not an unfamiliar story for this part of the housing market. Higher construction and debt costs together with general economic uncertainty has applied downward pressure on the supply pipeline,” he said.

“Given supply is forecast to slow and with legislative reviews that will affect the sector currently underway in five separate states – Victoria, Queensland, South Australia, Western Australia and Tasmania – we urge caution to policymakers.”

The number of people older than 65 will increase from 4.4 to 6.6 million by 2041, which Mr Gannon said represented both opportunities and risks for governments.

“If governments make it harder for operators to build and operate retirement communities, the supply clamp will tighten even further – on a sector that we know offers an affordable and bespoke offering for older Australians, who simply can’t keep up with the traditional market which is becoming increasingly unaffordable to rent or buy into,” he said.

Speaking on a recent episode of Secrets of the Top 100 Agents, Antonia Mercorella, CEO of the Real Estate Institute of Queensland (REIQ) broached the issue of finding appropriate accommodation for older Australians who are currently still living in large family homes, and emphasised that she’d like to see states create tax settings that help empty nesters feel financially able to move, if they so choose.

She noted that while some retirees still living in large family homes don’t wish to leave, many do, yet are deterred from making the change due both to a lack of supply of appropriate homes in the locations that they desire living in and the financial costs of real estate transactions.

Ms Mercorella singled out stamp duty in particular as a huge disincentive for older Australians who are occupying large homes to move into something smaller.

“We think it’s time for Queensland to start to look at [stamp duty reform]. At minimum, we think a really great starting point is addressing those empty nesters, who have got those big lovely properties with lots of bedrooms and a big backyard, and they’re sitting mostly vacant.

“We know that these are ideal homes for growing families, but, of course, sometimes people are sitting in those homes, because they don’t want the stamp duty impose associated with downsizing or rightsizing,” she said

Ms Mercorella noted that the federal government has moved to lessen the financial burden on Australians who are looking to downsize in retirement, such as by allowing those 60 and over to make superannuation contributions from the proceeds of the sale of their home.

“It would be nice to see the state government complementing some of those federal initiatives and offering either a stamp duty waiver or a stamp duty reduction,” Ms Mercorella said.

“That could be a really good starting point, but then looking for ways that stamp duty doesn’t need to be paid upfront. Because let’s be honest, there’s not too many of us who have a wad of cash of that size sitting there ready for the taking. So I think if we could remove that obstacle, we’d find that people would move about more freely,” she added.

This, in turn, is expected to have a trickle-down effect to helping first home buyers get onto the property ladder, as they’re often looking for the type of home to accommodate a growing family.

It’s important to note that depending on how retirement communities are set up, stamp duty is still often payable if the village operates under a strata, community or freehold title. It’s only if the community offers a leasehold and licence title arrangement that downsizers can currently avoid paying stamp duty when moving into a retirement living complex.

Additionally, much of the decision on whether to rightsize often comes down to the availability of more appropriately sized homes in or near the neighbourhoods in which empty nesters have lived and raised their families. This is already an issue, with advocates stressing that governments need to look at the diversification of housing options when encouraging development.

As Ray White chief economist Nerida Conisbee noted: “Many [downsizers] want to stay in their neighbourhoods and there aren’t suitable smaller homes available to them. This could be addressed through ensuring developing suitable smaller homes in neighbourhoods with a large number of ageing households.”

Mr Gannon noted that with the baby boomer generation increasingly reaching retirement age, it’s important that governments act now to ensure housing that is fit for purpose is available to them, for a variety of economic reasons.

“Australia’s population is ageing, which means our three tiers of government need to address and solve the challenges associated with housing this demographic cohort now,” Mr Gannon said.

“If more seniors are living in age-friendly communities, there is significant economic upside for state and federal governments through reduced interaction with the health system and delayed entry to aged care,” he added.