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By Michael Yardney
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The Inheritance Tsunami: What the Baby Boomer Home Legacy Means for Future Generations

Australia is at the precipice of a monumental shift in property ownership, thanks in large part to an aging population.

The Baby Boomer generation is aging, and with that will come a massive transfer of wealth.

Bernard Salt recently wrote an insightful column in The Australian - "Get ready for Australia’s great home inheritance avalanche," suggesting baby boomers are expected to leave an average of $320,000 to each of their millennial children (born 1981-1999).

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This represents a significant sum of money, and it will have a major impact on the Australian economy.

It will boost household spending, which will help to stimulate economic growth.

It will also help to reduce inequality, as many baby boomers are homeowners who have built up significant equity in their properties.

The Phenomenon of the Inheritance Avalanche

In his article, Bernard Salt delves into the increasingly challenging landscape of home ownership, particularly for younger generations.

However, he predicts a wave of inherited homes, as older Australians, predominantly baby boomers, pass away and bequeath their assets to their children.

This 'inheritance avalanche,' Salt asserts, is likely to gather momentum later this decade, peaking in the early 2030s.

Geography

The Geographical Hotspots: Fadden and Beyond

Salt says:

‘This prompts the question of precisely where are all these pre-eminently inheritable (and unencumbered) homes, and how long before these older homeowners, well, let’s just say, eternally vacate this space?”

Utilizing 2021 Census data, he found that:

“There were 4.4 million people aged 65+ living in Australia according to the August 2021 Census, some 27 per cent (or 1.2 million) of whom headed a household where the home was owned either outright or with a mortgage.

It is not unreasonable to assume that most of these properties would have been owned outright.”

So, where are the hot spots of these homes?

Salt found that in the Canberra suburb of Fadden, 44% of residents aged 65+ own their homes.

This is significantly higher than the national average of 27% for the same-age cohort.

In the broader context, Salt highlights that Canberra outperforms other states in terms of home ownership in later life.

He attributes this to the city's high average income levels, bolstered by a public-sector-dominated economy.

Additional Suburban Niches

The phenomenon is not limited to Canberra; Salt points to various other suburbs with similar demographics.

For instance, in Brisbane's Westlake, 42% of residents aged 65+ own their homes. Similar trends can be observed in Perth’s Winthrop, Adelaide’s Coromandel Valley, Sydney’s Woronora Heights, Ballarat’s Smythe’s Creek, Hobart’s South Arm, and Darwin’s Wulagi.

Hotspots

The Market Impact

Salt theorizes that this glut of properties coming to market could lead to localized reductions in house prices.

However, this will not be evenly distributed; certain areas, particularly those with a high concentration of older homeowners, may experience a more marked impact.

I’m not so sure he is right – there will be a queue waiting to get into these tightly held suburbs and developers will love pulling down the old homes past their use-by date and building apartments and townhouses in these highly sought-after suburbs.

The Regional vs. Urban Divide

While the focus often tends to be on metropolitan areas, regional cities will also be affected according to Salt.

They too harbor older homeowners who will eventually pass down their properties.

Broader Economic and Social Implications

This upcoming “avalanche” has multiple economic dimensions according to Salt.

For instance, the inheritance tsunami is expected to boost household spending by an estimated $100 billion per year."

Further, sectors that primarily serve older homeowners, such as companies offering reverse mortgages or household maintenance services, need to prepare for changing market conditions.

Additionally, the phenomenon presents opportunities for property developers to focus on suburban allotments suitable for more efficient housing developments.

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Conclusion

Today’s baby boomers are aged 60-77; mortality rates will quietly do their fatal work over the balance of this decade meaning the 'inheritance tsunami' is not merely a speculative theory; it's a demographic certainty backed by data.

So the question is not if, but when, and how profoundly it will affect the Australian property landscape.

As Salt eloquently puts it,

"It’s only a matter of time before families start having the kind of difficult conversations necessary to manage mum and dad, or maybe just mum, into more suitable accommodation."

While these changes may present challenges, they also offer opportunities for property investment, market readjustment, and social planning.

Stakeholders across the spectrum—from government agencies to real estate investors—should carefully consider strategies to navigate this unprecedented shift in property ownership.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
4 comments

Michael there is another interesting aspect to this. Shirtsleeves to shirtsleeves in three generations is the reality in finance. In Australia since 1984 only about 15 names have appeared in every rich 200 list. Since 1900 I doubt whether even a sing ...Read full version

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The more trumpeting about an "inheritance tsunami" there is, the more likely there will be a death tax introduced. The UK already has a 40% inheritance tax and a six year gift tax (so if you get cancer, you'd better hope you don't die at 5 years and ...Read full version

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