Asset rich, cash poor

Retirees who want to splash out a little can tap into their home's value. Just be sure to read the fine print before signing any paperwork.

- NICOLA FIELD

Eight out of 10 over-60s in Australia are homeowners. That's great for their wealth.

The problem arises when the family home is the only asset - no super, no investments, just the age pension to get by on. For younger generations struggling to break into the property market, the idea of being asset-rich, cash poor can seem like a privilege rather than a problem. For retirees, however, it presents real challenges.

Many seniors purchased their home decades: s ago when property prices were vastly more affordable than today. Over time, those properties have skyrocketed in value.

A report by Aussie Home Loans found that in the 30 years from 1991 to the end of 2021, home values nationally rose by around 6% annually. As a result, a modest home in the NSW Central Coast suburb of Gwandalan, which cost $81,710 in the 1990s, could now be worth in excess of $775,000.

Melbourne's Oak Park, where homes now sell for $825,000, had a median value of $113,400 in the early 90s. In the Brisbane suburb of Wavell Heights, homes that sold for $113,400 30 years ago are now worth close to $1.2 million.

The climb in values may have given seniors considerable home equity. But it doesn't pay the bills. Without the benefit of career-long employer-paid super, eight out of 10 over-65s rely on the age pension. The Grattan Institute found as many as 15% of homeowners aged 65-plus live in poverty.

Downsizing dilemma

Anne Graham, senior financial planner with Story Wealth Management, says that where a retiree's only income is the age pension, yet they have a valuable property, they can downsize.

But downsizing is "emotionally difficult if seniors have lived in the home for many years". Moreover, downsizing doesn't always live up to the hype of producing a pot of gold.