The great housing dilemma - baby boomers aren't moving

[VYBerlinaV8]

I don't know about this Ausprop - I suspect a lot will just be inherited by the kids and kept in the family and/or sold by the kids to fund their own house purchases. Either way they won't so much be flooding the market as promoting another spurt of buying as kids now have money to spend.

my 2 cents anyways - we may all be on the moon in bubble houses by then eating pill form food with a choice of clothing from the startrek catalogue.

To take this point a bit further, I've noticed that in my family the standard thing to do when an inheritance is received is to spend the money on cars, holidays and general stuff. It seems people feel almost guilty about receiving the money.

If this is representative of wider Australia (and I'd say my family is, in many ways), then although the BB houses will hit the markets, the spend that comes with them will stimulate the economy.

As most of you will realise, I'm just guessing here. Anyone have any thoughts about this?

 

[Graemsay]

The Baby Boomers were lucky, rather than spoilt. They bought into the property market when during an era of high inflation and interest rates. The former eroded the size of their mortgages, whilst the latter kept prices down due to affordability.

They really benefited from the fall of inflation in the '90s, as borrowing costs dropped, and house prices rose.

And they got a pretty good deal in (at least in the UK) terms of government services. I've got a feeling that there are figures showing that they'll be net beneficiaries of handouts for pensions, education, medical care and so forth.

If they want to make amends then this article has one suggestion.

http://www.theatlantic.com/magazine/archive/2010/10/the-least-we-can-do/8228/

 

[Sunfish]

Yes we were lucky weren't we.

For most Uni just wasn't an option unless you had a wealthy Dad and even they didn't waste money educating their daughters.
No FHOG
No FHOG boost.
No grant to build in Vic country regions.
20% deposit "proven savings record". No exceptions.
What we got was 3br w/board high set with a laundry slab and parking under.
Very few two income families.
Women got 60% of male wages.
5 year apprenticeships, poorly paid till the last year.
Junior wages till 21 and they were pretty poor.
No preschool.
No kindy.
No after school care at all so no guvmint subsidy.

You can cherry-pick things which say we ripped you off, but that's all you are doing. Every age has it's difficulties, some are overcome only to be replaced with others. If you care to embrace the positives and stop feeling sorry for yourself life can still be good, but not so if you expect to be spoon fed.

 

[wylie]

Great post Sunfish. I am just 50 and my parents were born in the 1930s. Mum had to resign when she married in 1958 . Forget equal wages, she couldn't even have a job if she was married.

Just ten minutes ago, my 21 year old son was whining about wishing he could turn back the clock and buy the house we live in for $230K. I said when we bought it for $230K we wished we could have turned back the clock and could buy it for $80K and whoever bought it for $80K remembers when they could have got it for $20K etc etc.

I said one day he will not be able to believe he could buy a house when he was 21 for $300K.

Some of the younger generation will ALWAYS whine about how their parents had it easy, yada, yada, yada. They just need to get cracking, get into the market, get moving, get off the couch, stop buying the latest phone etc, stop spending on wants as opposed to needs etc.

I have been looking for units or houses for my son. He said he doesn't want to borrow to the hilt, but he will have to if he wants to buy. His salary is not high.

He said just this morning that friends who may move in with him to help his expenses will only move in if they have their OWN bathroom and if it is close to transport and/or close to the city. He said (rather dissmissively) that he would rather rent in New Farm than pay a mortgage for a house in Murarrie.

I said "fine.... pay rent in New farm and the house in Murarrie you can buy now for $300K will be $400K in five years and you will not even be able to afford it. You can help the investor at New Farm pay their house off."

My blood boils with his attitude. Typical of many of his generation, his friends have to have a bathroom to themselves. It takes all the pleasure of helping to find somewhere he can afford out of it.

I actually believe his friends would be happy to share a bathroom, except those who already are paying rent and have their own bathroom.

I have suggested we can lend him some money to get him over the line, but his negativity and his attitude makes me think "stuff it - do it all yourself".

 

[Piston Broke]

Looks like the big developers of seniors housing are doing it tough and need to spin more BS on top of the gov concessions they get for their payments.

 

[Mr. Fabulous]

wylie, I'm going to take a shot in the dark here and guess you've been drumming investment principles into your kids since they were very young.

Having said that, there's only so much you can do. You can teach the kids the principles of investing until the cows come home, but at some point they have to take over the reins and start taking action.

When I was young(er) my step dad used to talk to me about investing. At the time, I thought it was going in one ear and out the other (and so did he!), but when I got to my mid 20's, it all kinda clicked and I haven't looked back since.

P.S. where are these houses in Murarrie for 300K? I want one!

 

[wylie]

You are right Mark, but this desire to get his own place is driven by him. He has grown up helping us paint and renovate (not all that often, but when we had a job on, the kids would muck in and help until their mid-teens, when they lost interest).

He has started talking about having his own place. At nearly 22, he wants some freedom, which I understand, though he is pretty much able to come and go and almost live downstairs with his own ensuite, so it is not like he is under foot upstairs and feeling cramped.

I think what frustrates me the most is that he asks my opinion, I give it, and he ignores the positives and picks the potential problems with my ideas. It is like he is wanting to find a way that it WON'T work whereas I am more the "how can we MAKE it work" type of personality.

I end up getting steamed up and have just emailed him a lengthy missive about just this problem, his glass half empty mindset, and explaining that we want to help him, not cricitize him. Sometimes helping means constructive criticism on some of his choices and attitudes, and to show him how he can try to save money instead of wasting it on his "wants".

I am awaiting his reply . Putting on my alfoil shield now .

 

[lizzie]

wylie - we too have had similar issues this last year.

take a deep breath and remind yourself that they have to find their own path in their own time.

i remember back to 21. there is no way on earth i would take the advice of my "old fogey" parents - although they are not so old now!

i even look back 18 months when one stepdaughter came to me regarding buying a unit - we sat down, went thru all the sums, i found some examples of what she could afford, rang the broker to see if we could do it ... all good ... then she decided to by a new car, save the rest of her money and share rent when she moved out of home.

in the 18mths since units in the area she was looking have gone up by 25%. opportunity of making a quick $70k gone. but she will find her own path in her own time and needs to experience it for herself.

man, wish i'd taken my own advice and bought some!

another moved out of home to a location where she can't get a job (with 4 year uni degree behind her) purely to be with boyfriend - who is also unemployed. do you think that irks? do you think we don't occasionally remind them that as neither work they can move? deep breath!

 

[MichaelW]

We're off topic now, but I have to chime in. Don't berate the GenYs for their rent now, buy later attitude! I love it and they'll buy in time...

I rented my former PPOR in Narrabeen to 4 single guys for $750pw 12 months ago. No problems, diligent rent payers, but they just gave notice and moved out. Bumma. We re-listed it and got new tennants on the first open at $800pw. Bonus. And the new tennants are three 20-something girls sharing.

I love the GenY bunch-up and rent types. Means my beautiful big house can rent for $800pw with three employed individuals splitting the rent.

The Boomers never come through the opens to rent, they're sitting on their cash and paid off houses. We do get the odd family GenXer but its mostly splitting GenYs. We need them for their rent servicing capabilities.

But it does suck a bit when they're your own kid and you wish they'd put that money into paying their own place off and not mine.

Cheers,
Michael

 

[zed_kid]

Check the young investors thread, there are still switched on GenYs around.

 

[Graemsay]

Australian house prices have been rising faster than wages for a long time. The property investors here (many of whom seem to be Baby Boomers) are beneficiaries of this trend. The much maligned Generation Y are the ones who have to pay for it.

Perhaps Generation Y are actually being really smart: Renting is significantly cheaper than buying, and so they're taking advantage of the arbitrage opportunities that exist between the two markets. And by not holding property they're effectively shorting house prices.

Disclosure: I'm a member of Generation X.

 

[Sunfish]

Australian house prices have been rising faster than wages for a long time. The property investors here (many of whom seem to be Baby Boomers) are beneficiaries of this trend. The much maligned Generation Y are the ones who have to pay for it.

Conformation please. None of my peers have done much more than buy a house to live in. I do however some rellies of the next gen buying property. It is not clear that they are investing, just buying.

Do you KNOW BBs who are big investors or are you merely finding a scapegoat?

nb. i have never met any of my peers using neg gearing to become wealthy. THAT is the idea which has pushed up prices, not buying a roof over your head.

 

[grossreal]

hi all
from what I see the cruise ships are basic floating nursing homes
I read somewhere 70% of the people on them travel with a nurse or carer.
the issue is that most countries do not want retirees to have any money and if they do they tax to high heaven so they spend it
arn't moving not sure where you have been looking
for me they are
just not into property.
not alot of point being retired and investing into property.
first its harder to get a loan and the issue of paying it off
the sepp 55 were aimed at boomers down sizing trouble is they then have to go thru the purchase process and they at this age just can't be bothered
they do better to reverse mortgage and use the money to see the world
the biggest problem is the funds that people invested into and are currently frozen.
this is causing alot to reverse mortgage to live
and this does not allow them to move
so you have three type
one have nothing to invest
two have money but is locked or frozen
three using reverse equity to sit on a ship somewhere seeing the world.
or plane
the problem is comming in about 15 years when the max boomers hit the pension
and the boomers out number the employed now that will be fun

 

[Graemsay]

I wasn't scapegoating, it's more to do with timescales and ages.

There's been a bull market in property for nearly fifteen years in many countries. In the UK prices have been above their long term trend in 2000 or so, meaning the main beneficiaries are going to be upwards of 35 or 40.

The youngest Boomers are in their mid 40s, so that cohort will have been the main winners, as will older Gen Xers.

High house prices represent an intergenerational transfer of wealth from the young to the old. So, yes, Gen Y is being penalised.

I'm not trying to scapegoat anyone, but rather am stating the fact that anyone born before the mid seventies and who managed to get into the housing market before 2000 has done very well. And this has been down to luck more than any real skill in my opinion.

Personally, I think that if the market sours then the real losers are going to be those in their thirties and early forties, which is my cohort. They will be more highly leveraged than the Boomers, and so more likely to end up in negative equity. The younger group (Gen Y) will be earning well and possibly able to snap up bargains.

That's roughly what's been having in Ireland...

http://www.independent.ie/opinion/analysis/collapsing-house-prices-we-aint-seen-nothing-yet-2301078.html

 

[marg4000]

Let's not generalise.

There are wealth builders in all generations. Some pursue different paths which is fine, personally I think travelling while young is a wonderful thing, and possibly a better option in their early 20s than knuckling down to a mortgage.

I did the big working holiday in NZ in my late teens and it remains one of the highlights of my life.
Marg

 

[wylie]

The thing about travel these days is that it is much more attainable than it was 25 or 30 years ago. I was so keen when young to get on the property ladder that I suppose I had to chose between a mortgage, a new(ish) car or an overseas trip. It was an easy decision because I wasn't particularly interested in travel anyway. I had been on a few cruises and went to Hong Kong with my parents at about 18, so I had seen a little of the world.

The thing is, these days, travel is so much cheaper than it was 25 or 30 years ago. I think young people could do both more easily than "back in my day". I really don't think doing both was an option, certainly not for me, and certainly not when you think back to what it cost to fly to Europe compared to the cost of other things.

Return ticket to New York for $1250 anyone? It would be interesting to know how much that same ticket was 30 years ago, and how it compares to the prices today.

 

[Peter Parker]

To take this point a bit further, I've noticed that in my family the standard thing to do when an inheritance is received is to spend the money on cars, holidays and general stuff. It seems people feel almost guilty about receiving the money.

If this is representative of wider Australia (and I'd say my family is, in many ways), then although the BB houses will hit the markets, the spend that comes with them will stimulate the economy.

As most of you will realise, I'm just guessing here. Anyone have any thoughts about this?

I think this habit of Australians is wonderful and there should be even more of it.

Inheritance represents a windfall gain of unearned wealth.

It is thus a lesser form of income that that which derives from the individual's own work.

Like gambling it is evil since it breaks the relationship between work and wealth that forms the social contract that legitimises capitalism (and hence private property) amongst the populace.

Giving away, spending or heavily taxing inheritances (doesn't matter which) are all socially beneficial.

Much more so than keeping it (unless if in the form of a productive business which contributes to commerce and is in everyone's interest to keep going).

Since keeping inheritances leads to a plutocracy of entrenched privilege and a relatively lesser role for the 'self-made' (which drives initiative and enterprise) the fast disposal of inherited wealth, though regarded as 'squandering' by some, is overall a good thing.

 

[Kristine..]

Hello Spiderman

Well said! I enjoyed reading that, and it’s always interesting to see things in a political context.

But it should also be taken into account that for many people, receiving their share of their Parents' estate may be the only time in their own lives that have money to spend.

We are a nation of Battlers, mainly unsung and unappreciated.

We all do the best we can, but for most families there is one primary breadwinner for many years and by the time the children start to leave home it is all that most people - by then, perhaps DINKS with some loose change, who have to knuckle down to pay off the mortgage in preparation for their own retirement.

When the parents die - usually one first with the second parent perhaps needing care for some years, and their modest weatherboard is sold and shared between their three or four children, there may be enough for a new kitchen or a modest trip - most likely to see whatever relatives there may be in another State or overseas.

After that, retirement on the Pension (God Bless Robert Menzies!) stretches ahead.

So why not spend the inheritance?

When my Mother died after 7 years in care, the four of us received equal shares. I knew how frugal my Parents had been and I couldn't bear to just spend it, so I bought a block of land and buried my inheritance.

Of course, the block would just grow weeds, so it made sense to build on it just to keep the grass down, and luckily I was in a position to be able to do that.

That inheritance has and will continue to produce income which will eventually mean that my own retirement is less reliant on the Pension - and that I will be able to 'spend' a bit and thereby continue to put money back in to circulation

I don't begrudge anybody spending their inheritance. At one time our neighbours' Aunt died, and she had told my neighbour very sternly: 'You are to go on a long holiday with the money I leave you. You are NOT to put it into your business and you are NOT to give it to your children.' The Aunt said that she had always wanted to travel but could never justify spending the money and that her Husband had never wanted to go anywhere. So the Aunt was adamant that my neighbour simply spend it and get pleasure from it.

So, Spiderman, I don't consider inheritances to be 'evil' or to corrode the capitalistic system. I do consider it a great shame that many people never allow themselves to enjoy their money and can certainly understand why the Aunts of this world would rather their benevolence go towards holidays than it just go into general household revenue.

My personal response was based on my respect for my Parents’ work and thrift, and I am very proud of the resultant nice house, but for many people the inheritance will be the only new carpet they will ever see or the only new car they will ever be able to afford.

If I was to receive an inheritance now, I would spend (some of) it on something frivolous and beautiful – and I am at the age now where beauty is starting to take over from practicality on my list of things to do.

May be one of those garden swing seats would be nice, in my lovely new garden by the Bay!

Cheers
Kristine

 

[VYBerlinaV8]

Any inheritance I was to receive would go solely on reducing debt. The enjoyment would come from knowing how many months or years it reduced my working life by.

A bit sad when you put it in those terms, but what the heck...

 

[wobbycarly]

Australian house prices have been rising faster than wages for a long time. The property investors here (many of whom seem to be Baby Boomers) are beneficiaries of this trend. The much maligned Generation Y are the ones who have to pay for it.

Perhaps Generation Y are actually being really smart: Renting is significantly cheaper than buying, and so they're taking advantage of the arbitrage opportunities that exist between the two markets. And by not holding property they're effectively shorting house prices.

Disclosure: I'm a member of Generation X.

Well, according to this, there's not too many BBs here.