How wealth transfer and housing inheritance stack up
National housing inheritance was predicted to rise from $16 billion in 2009 to $31 billion per annum in 2025 – and growing.
Of course, there are variables (releasing equity, aged care, improvements in life expectancy and housing debt) in the equation.
But given that these industry projections did not account for any future price increases, it’s reasonable to expect that the value of wealth transfer will only rise exponentially.
Not counting on handouts
The inheritance that may never come is another issue for Generation Y.
Research from a recent Bankwest Curtin Economics Centre Housing Affordability Report discovered that 86 per cent of Gen Y aspire to own their home — but the gap between their deposit and what was required was the biggest barrier.
The average deficit was more than $50,000. Of those Gen Ys already in their own home, 38 per cent received financial assistance from parents or grandparents. But for those yet to enter homeownership, almost 60 per cent felt they were unlikely to receive any intergenerational assistance and, consequently, stop them from ever entering homeownership.
Also complicating the equation is that first home buyers are purchasing at an older age.
The downside to this is that they could still be paying off their home when they reach retirement age, meaning the transfer of wealth to children was also unlikely.
Bankwest Curtin reported, “a combination of rising property prices, an ageing population and high homeownership rates will produce a perfect storm with record intergenerational wealth transfer or inheritance”.
Overcoming financial obstacles
A solution for the affordability puzzle could almost be on our doorstep.
The McCrindle Blog reports that baby boomers account for a quarter of the population, but they possess more than half the nation’s wealth.
“While the Gen Ys have decades of wealth accumulating ahead of them, it is unlikely we will ever see the likes of today’s boomers again, where a quarter own more than a half. The boomers have been the beneficiaries of a near-50-year economic miracle, and they are unlikely to ease out of this accumulating any time soon,” reports the McCrindle Blog.
But there is hope for emerging generations whose wealth has stagnated.
“The households of people aged 55-plus currently own a combined $2.8 trillion and over the next two decades will pass on much of this. By the time they move from the growing to the spending side of this accumulation, it will have exceeded the $3 trillion level.
“Therefore, the decades ahead will see the biggest intergenerational wealth transfer and many of the younger generations will be the main beneficiaries,” says the blog.