HILDA survey shows generational housing and wealth divide

The Melbourne Institute’s latest Household, Income and Labour Dynamics in Australia (HILDA) report has been released, which shows that the nation’s average household assets increased by 64% to $1.37 million between 2002 and 2018. However, average household debt rose by 104% to $203,496 over this same period:

The growth in assets was driven by housing, which increased in value by 77% between 2002 and 2018. The same goes for household debt, which rose by 133% over the same period.

Net wealth also surged between 2002 and 2018, whereas wealth inequality also increased:

Mean wealth of households increased by 58.0% in real terms to $934,025 in 2018, while median wealth increased by 56.8%, to $503,563…

Between 2002 and 2006, when mean wealth grew strongly, wealth inequality (as measured by the Gini coefficient) also grew, largely because the very wealthiest became much richer…

The baby boomer generation has also enjoyed the biggest increase in wealth:

Prior to 2010, the median wealth of people aged 65 to 74 was less than that of those aged 45 to 54, but by 2010 the median wealth of the 65 to 74 age group had overtaken the median wealth of those aged 45 to 54. This reflects the very strong growth in median wealth between 2002 and 2018 for the 65 to 74 age group, with the median increasing by 98.1%. Growth was also strong for the oldest age group, increasing by 83.4% between 2002 and 2018.

Meanwhile, the home ownership rate has declined from 68.1% in 2002 to 63.9% in 2018:

Fortunes clearly favour the old in Australia.

Unconventional Economist
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Comments

  1. If fortune favours the old, then why do we have hellhole nursing homes? Why are there two or three year waiting lists in the public hospitals for cataract operations and knee surgery, while people are stumbling around half blind, or crippled and in excruciating pain? Why do we have one of the least generous aged pensions in the OECD, even though it is the sole or main source of income for most retirees?

    https://data.oecd.org/socialexp/pension-spending.htm

    The superannuation system essentially benefits the top 10% of the population with a few crumbs for the next decile down. There is very little meat left on the bones for the rest after fees, taxes during the accumulation phase, and aged pension means testing.

    https://www.macrobusiness.com.au/2020/02/industry-funds-admit-12-superannuation-will-benefit-rich/

    The famous baby boomer rorts only benefit people who already have significant assets. Negative gearing won’t help you if you don’t own an investment property. The land under your house might now be worth a lot of money if you live in a major city, but there is no way to realise that wealth unless you are prepared to sell up and move far away from your family and friends, and the services that elderly people are likely to need, to someplace where housing is cheap. Reverse mortgages are a scam.

    Fortune favours the rich, whether they are old or otherwise.

    • Reverse mortgages are NOT a scam.

      It is time boomer millionaire retirees are forced to take a out a reverse mortgage before accessing public pension and health systems.

      • Do the math. The last time that I calculated, the Pensions Loan Scheme had an interest rate of 5.25%. It was even higher for the commercial reverse mortgages. This interest rate has a debt doubling time of a little over 13 years, and it was around 11 years for a commercial reverse mortgage. If a couple took out a reverse mortgage at the Pensions Loan Scheme rate to draw down the equivalent of the full couples aged pension, they would owe around $700,000 after 13 years, including interest. Let’s assume that they hit the assets test threshold (including the family home) at that point, so no more principal will be added to the debt. The interest will continue to snowball, so the debt will double to $1.4 million in another 13 years if one or both of them live that long, wiping out everything that they have.

        There is an equity issue, but the best way to deal with it is to tax houses when they are passed on to anyone other than the surviving spouse or an actual dependant, just as we do now with some unused superannuation balances. This would also catch people who get their (sometimes far more generous) welfare from superannuation tax concessions rather than a pension.

        Elderly people have paid a lot of taxes over their lives to support the public health system. Now you are saying that they aren’t entitled to use it if they have assets, but younger rich people are.