This paper explores the connections between housing assets and retirement incomes. Older people’s high rates of home ownership today and rising house prices from about the 1990s:
- Have made today’s older people and people nearing retirement wealthier than other population groups, despite their very high dependence on New Zealand superannuation and low incomes.
- Fuelled the idea that older New Zealanders can supplement their retirement incomes through liquidating at least some of their housing assets.
The practicalities and effectiveness of financial instruments such as reverse equity mortgages or downsizing to fund retirement incomes and the fiscal impacts of an ageing society, even in the short to medium terms, are questionable.
There are considerable risks for individuals and potentially negative spill over effects associated with liquidating older people’s housing assets. Those include higher rates of entry into rest home or other higher dependency environments, disconnection with family and community networks, issues arising from insecure tenure for people who downsize into rental housing, health related costs associated with poorer housing, and issues arising from reduced inter-generational transfers within families.
In any case, in the medium to long terms, under current policy and market settings, the future older population will not have the high rates of debt-free home ownership evident among older people currently. This is because of falling rates of home ownership associated with the:
- Same over-heated house prices and building costs that have given some older home owners considerable windfall gains; and
- Erosion of the home ownership support previously available to young householders in the post-war period up until the early 1990s.