Flee the boomer property flood

[paulzag]

Chris Lang has an interesting point in his commentary today at Business Spectator. http://www.businessspectator.com.au...ation-property-baby-boomers--pd20110818-KU32B

I don't always agree with Chris, but he always raises interesting points.

I think the coming baby boomer liquidation will have significant impact on wealth creation.

 

[Aaron Sice]

whatever.

honestly, people who picked up property 10-20-30 years ago are living off the rent and owe nothing.

why would they kill the goose that lays their golden egg?

 

[silverx]

whatever.

honestly, people who picked up property 10-20-30 years ago are living off the rent and owe nothing.

why would they kill the goose that lays their golden egg?

yeah but that wont be the case, they would have drawn the equity out of their home for their holiday, kids education, another IP etc and they probably on the same debt level as any late starters

 

[paulzag]

I know a number of boomers who experienced a divorce. That puts a significant hit in wealth creation.

The key point is that many baby boomers will be exiting their PPOR over the next 15 years. If that happens there will be significant supply of 3- to 5- bedroom houses in the inner ring suburbs.

Some business-services firms are getting ready for generational change in small business ownership as boomers retire. If this happens then the same will happen in the $1M to $4M range family home market.

 

[The Fence]

yeah but that wont be the case, they would have drawn the equity out of their home for their holiday, kids education, another IP etc and they probably on the same debt level as any late starters

You didn't read Aarons reply and fully understood it did you...?

He said they owe nothing..therefore they didn't do what you presume they will do.


I take something quite different out of that article....

As you can appreciate, there could well be a number of people who might not be aware they have a problem, and may, quite unwittingly, be leaving themselves exposed.

...Hmmmm...'there could well be.....who might.....and may.....'

Speculative at best...IMHO

 

[VYBerlinaV8]

Interesting linky... http://www.abs.gov.au/websitedbs/d3310114.nsf/home/Population Pyramid - Australia

Data from the ABS showing population by age over time. Based on this I wouldn't have though the baby boomers are going to be as much of a propblem as first thought, especially given that they will be working longer to replace super that has devalued over the past 4 years.

 

[dan c]

I know a number of boomers who experienced a divorce. That puts a significant hit in wealth creation.

The key point is that many baby boomers will be exiting their PPOR over the next 15 years. If that happens there will be significant supply of 3- to 5- bedroom houses in the inner ring suburbs.

Some business-services firms are getting ready for generational change in small business ownership as boomers retire. If this happens then the same will happen in the $1M to $4M range family home market.

If inner ring houses come on the market, they will be snapped up by people in the outer ring. First home buyers will then buy the outer ring properties.

Lather, rinse, repeat...

 

[Aaron Sice]

yeah but that wont be the case, they would have drawn the equity out of their home for their holiday, kids education, another IP etc and they probably on the same debt level as any late starters

that makes a mighty big assumption for a mighty big investment class.

 

[Aaron Sice]

He said they owe nothing..therefore they didn't do what you presume they will do.

a majorty of people aren't investors.

a majority of investors own less than 2 properties.

a majority of those will have paid their mortgages off if they bought 25-30 years ago.

yes, there is wiggle room for the exception - but let's take it on face value of a majority, here.

 

[Sunfish]

yeah but that wont be the case, they would have drawn the equity out of their home for their holiday, kids education, another IP etc and they probably on the same debt level as any late starters

What a rude generalisation. If this is the standard of logic you use when investing you are in trouble.

ps Gen X and Y live their life in a drug induced haze, will never amount to anything and will die young through substance abuse!

Or shot by their pay-day lender.

Ah! Feel better already. LOL

 

[paulzag]

Yes Chris Lang always uses hedged language - it's a product of his training, being wrong is worse than being right.

Does anybody know a 30 year property investor who is debt free and still owns all the properties they've ever bought? That's an extreme interpretation of Aaron's case, but not that extreme. Every rich property accumulator I know has added debt over the years. The survivors add debt at a much slower rate than they add equity.

Long term investors load debt when they see opportunity and are sometimes caught out in a market change.

But the article is not talking about the pitifully small number of successful property investors. It's talking about the huge numbers of baby boomers who are sitting on the #1 asset - their PPOR and thinking of it as 60% of their super. What happens as they liquidate and downsize?

Can real estate continue long-term returns of 10%+ in this scenario?

 

[paulzag]

a majorty of people aren't investors.

a majority of investors own less than 2 properties.

a majority of those will have paid their mortgages off if they bought 25-30 years ago.

yes, there is wiggle room for the exception - but let's take it on face value of a majority, here.

My point exactly! except...

that doesn't make them property investors. It also means that baby boomers who think their houses are worth say $1.3M are in for a shock when they go to sell. And nothing is worse to average people than sitting on a say 30% paper loss.

 

[Sunfish]

It's talking about the huge numbers of baby boomers who are sitting on the #1 asset - their PPOR and thinking of it as 60% of their super.

I prefer to read the original research paper, not a pre-digested version. Got the link?

 

[TomW]

I don't envy the younger generation they are going to be for our generation's pensions and health care for many years to come.

 

[paulzag]

I prefer to read the original research paper, not a pre-digested version. Got the link?

Neh. It's an op-ed piece in a "business" journal. It doesn't really cater to peer review.

Also Lang is biased to commercial property.

 

[Sunfish]

Neh. It's an op-ed piece in a "business" journal. It doesn't really cater to peer review.

Also Lang is biased to commercial property.

Do you know 80% of statistics are made up on the spot?

Sorry but I can't link to the research paper so you'll just have to trust me.

 

[sash]

This is already happening.

Just look at suburbs like Mosman, Northern Beaches, Castle Hill, West Pennant Hills.

Large home demand has dropped substantially. The market for these properties will not be as sought after.

However, the smaller older 3 bedders in these suburbs are substantially cheaper and are not or near land value (give or take 50-100k). These will command a premium...because it is cheaper to pay a gardener every twoo weeks than heat a large home!

I also think that as Chinese and Indian migrant set-up out West prices there will pull ahead of Northern Sydney as prices there are very high.

3 bedroom units/townhouses/villas will claim a premium in the subrubs where prices of houses are dropping. I was gobsmacked by how a 3 brm t/h in Castle Hill on Old Northern Rd sells for.

My point exactly! except...

that doesn't make them property investors. It also means that baby boomers who think their houses are worth say $1.3M are in for a shock when they go to sell. And nothing is worse to average people than sitting on a say 30% paper loss.

 

[Rolf Latham]

If inner ring houses come on the market, they will be snapped up by people in the outer ring. First home buyers will then buy the outer ring properties.

Lather, rinse, repeat...

history tends to repeat , certainly for the last 60 years this looks like SYdney


ta
rolf

 

[Marty McDonald]

Disagree with the outer to inner model in Sydney at least. People who grew up in the eastern suburbs, north shore, northern beaches, the shire and the inner west will in my experience rather cut off their right arm than go "way out west" to get a start. With the travel times only increasing over the last 20 years they are even more unlikley to do so than in the past.

 

[evand]

I know plenty of Italians, Greeks who have grown up in the inner west and when they married & have families have moved to the outer suburbs, larger houses, big blocks etc.

When they were growing up in in Leichardt, Marrickville, etc those areas had a serious stigma.

Disagree with the outer to inner model in Sydney at least. People who grew up in the eastern suburbs, north shore, northern beaches, the shire and the inner west will in my experience rather cut off their right arm than go "way out west" to get a start. With the travel times only increasing over the last 20 years they are even more unlikley to do so than in the past.