Leith van Onselen arrogantly and falsely claims as "MY HYPOTHESIS"; The theory that downsizing baby boomers will have a negative effect on house prices
Tweet Topic Started: 24 May 2012, 11:17 AM (5,603 Views)
Yes that is what I think too. There may be some runctions on a local level as boomers look to retire to other areas than the inner/middle suburbs that they now occupy, but on a national level, the transition should be smooth.
I tried to point that out to Leith on his thread yesterday, but he wouldn't have a bar of it. Unless he knows something that I don't, then I just don't see it. Bernard Salt doesn't help either with his ideas.
So who want's to own this theory? We can auction it.
The BB generation isn't--and doesn't need to be--bigger than subsequent generations, in order for its retirement phase to have significant economic effect.
What matters is that the BB generation is significantly bigger than the pre-WWII generation which preceded it, and enjoys considerably longer life expectancy.
In their peak earning years (roughly ages 35-55) the BBs brought a sustained surge of overall income growth to fuel the economy in general. Combined with a secular stepchange in consumer credit availability and cost, residential real estate values duly exploded during BB peak earning years.
The Gen X and Gen Y cohorts have brought similar absolute population increases into the economy, but in rate-of-growth terms, their relative growth impact--by mathematic necessity--will be less than that of the BBs.
Meanwhile, the BBs, after bringing outsized growth compared to prior generations, are now on the cusp of imposing outsized retirement cost growth on their children. BB retirement will on average be far longer in duration than before, more medically intensive than before, and overall more expensive than before. Their retirement income entitlements, particularly in the public sector, are typically "defined-benefit" instead of "self-funded", and the actuarial foundations for the longterm payout of these are questionable in many cases.
Meanwhile, BBs who have not fully participated in the workforce (whether due to gender bias, personal misfortune, or personal choice) during the golden years of defined benefit retirement plans, seem likely to become longterm and demanding claimants to public pension, subsidy, and medical entitlements, in numbers never before seen.
I don't disagree that health costs and aged benefits will grow enormously, however Leith said;
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In a nutshell, my hypothesis is that Australia’s baby boomer generation – which comprises roughly one-quarter of the Australian population but owns nearly half of the nation’s housing assets – will gradually become net sellers of Australian housing as they enter retirement, thereby acting to push down home prices in the process.
By soaking up money that might otherwise be spent on housing, it must have a negative effect on house prices, but to assume that house prices will be pushed into negative growth is a little strong. Can we really assume that boomers will be net sellers of homes, thus creating a supply that exceeds demand. Wouldn't that assume that any IP's owned by boomers who may wish to sell them, won't find a buyer. The fact that they already have a tenant means that the demand for the accomodation already exists.
Any expressed market opinion is my own and is not to be taken as financial advice
I was always led to believe that the BB generation was like a basketball passing through a hose, which led everyone to believe that the following generations were smaller, and an aged population pyramid would show a distinct bulge for the boomers followed by a "waist" as a smaller generation followed, however that isn't what the population pyramid looks like at all. It's almost drum or barrel shaped - the following generations are just as large, so as boomers move to smaller dwellings, the space left will be filled entirely by the following numbers IMHO.
In Australia the Pig Through a Snake effect is not as pronounced as, say, the United States, HOWEVER, the BB generation is still a large generation for their age. As any generation ages, some of them die, and in general, those who are 48-68 will be smaller by proportion than those who are 28-48. Because the BB generation was so large to begin with, although their numbers are similar to genX/Y, they represent an overweight proportion of people 48-68 years of age.
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We will face a huge demand on our aged care resources, palliative care etc, but housing just shouldn't be affected in the way that Leith believes - I just don't see a sudden massive oversupply occuring.
What do you mean by 'sudden'? The BB generation spans 20 years, they wont all downsize/die at once. It will have an effect on the housing market however, as b_b points out, BBs will move closer to essential services, so there will be a shift from burbs to centres and from large to small. This will push out x/y from those locations into the burbs with shitty transport, making them even crankier than they are now. The other unmentioned is the BB holiday home in some dying coastal town. I imagine dying coastal towns will continue to die, perhaps accelerating as the BB holiday homes are sold off.
THE sluggish housing market has sparked predictions that the latest generation of home owners will be unable to rely on their home as a key source of higher wealth, as many baby boomers did.
Instead, analysts say people who joined the housing market in the last few years are unlikely to experience the ''magic money machine'' effect of bumper rises in the equity in their homes.
In the late 1990s and early 2000s, house prices more than doubled, a trend that benefited even highly indebted owners.
Rising equity - the proportion of the house's value belonging to the owner, rather than the bank - was credited with boosting consumer confidence and spending.
However, analysts say the trend is unlikely to return, with Sydney house prices down 2.6 per cent in the past year and the Organisation for Economic Co-operation and Development this week warning of further risks nationally.
Christopher Joye, an executive director of Yellow Brick Road Funds Management, predicted that over the next 10 years, house price growth would be about half what it had been in recent decades.
''For the last 20 years or so house prices grew by nearly 8 per cent a year, however over the last four years they've only grown by 2 per cent per annum,'' Mr Joye said.
''Over the next 10 years we only expect house prices to track household incomes and we project that disposable household income should grow by about 4 to 5 per cent per annum.''
In Australia the Pig Through a Snake effect is not as pronounced as, say, the United States, HOWEVER, the BB generation is still a large generation for their age. As any generation ages, some of them die, and in general, those who are 48-68 will be smaller by proportion than those who are 28-48. Because the BB generation was so large to begin with, although their numbers are similar to genX/Y, they represent an overweight proportion of people 48-68 years of age.
In Australia the pigs following the BB pig, are actually larger. Add to that the immigration of people from the ages of 0 to 40 and that will increase the Gen X and Gen Y pigs even more. Our pigs get fatter - check out the population index that I referenced, it's interactive - move it to 2020 and beyond and see the results for yourself.
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What do you mean by 'sudden'? The BB generation spans 20 years, they wont all downsize/die at once. It will have an effect on the housing market however, as b_b points out, BBs will move closer to essential services, so there will be a shift from burbs to centres and from large to small. This will push out x/y from those locations into the burbs with shitty transport, making them even crankier than they are now. The other unmentioned is the BB holiday home in some dying coastal town. I imagine dying coastal towns will continue to die, perhaps accelerating as the BB holiday homes are sold off.
In the past retirees did head for a sea change or tree change, but the boomers may opt to stay where they are - they are already close to services.
Boomers selling off holiday homes will not add to the stock of needed homes where young families live and work.
The only cranky gen X and gen Y members that I meet are on these forums, the rest are all quite happy. So the proportion who share those feelings are quite small. There are always some discontented members of any group. The suburb that I live in is full of gen X and gen Y home owners, and they assimilate well with older generations. I think that you will find that the discontent exists mainly amongst those who went through uni and came out into the workforce later than their peers and with a large hex or help debt - that has put them behind those who entered the workforce earlier to take a sales job or a trade. I think that was a very negative policy by Howard - as a nation we should be prepared to train our young, and if that means a university education, then so be it, as long as they aspire to gain productive qualifications. From what I have read the student debt problem is much worse in the USA where the finance of education was through private lenders.
Look I'm sure there will be some effect on the house prices as boomers retire, some will sell and move elsewhere, but I don't subscribe to the theory that it will cause a price crash, although the experience will probably affect different areas in different ways.
In the end we will probably both be wrong, but it's good to think about possible scenarios and outcomes.
In Australia the pigs following the BB pig, are actually larger. Add to that the immigration of people from the ages of 0 to 40 and that will increase the Gen X and Gen Y pigs even more. Our pigs get fatter - check out the population index that I referenced, it's interactive - move it to 2020 and beyond and see the results for yourself.
No, they are not. You completely missed the point of my post. As generations age, SOME OF THEM DIE, which means that the generation shrinks in size (proportion) as they get older. Yes, life expectancy is increasing, but the life tables for pre-retirement age haven't varied that much, it's post-retirement that life expectancy has increased. Heart disease, cancer, auto accidents are all holding fairly steadily for those in pre-retirement.
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The only cranky gen X and gen Y members that I meet are on these forums, the rest are all quite happy.
Really? You've met all of them? I guess having the highest suicide rate for young males for 100 years means that xNy are topping themselves out of happiness.
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So the proportion who share those feelings are quite small. There are always some discontented members of any group. The suburb that I live in is full of gen X and gen Y home owners, and they assimilate well with older generations.
I guess your suburb must be full of B.Econ graduates that played soggy sayo with the others in their suburb while attending private schools.
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I think that you will find that the discontent exists mainly amongst those who went through uni and came out into the workforce later than their peers and with a large hex or help debt - that has put them behind those who entered the workforce earlier to take a sales job or a trade.
No, I find the discontent among those who can't afford to buy a house, travel each day on abysmal public transport or drive an hour and half each day on shit roads. I have met a lot of my generation from all economic strata and I don't base my observations on one middle class suburb full of silver tailed bankers.
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Look I'm sure there will be some effect on the house prices as boomers retire, some will sell and move elsewhere, but I don't subscribe to the theory that it will cause a price crash, although the experience will probably affect different areas in different ways.
I think there will be a price crash that has nothing to do with Boomers retiring and everything to do with having the most ridiculously overpriced houses in the developed world. Having said that, retiring Boomers will change the property market, especially if they sell property to draw down on retirement savings, dying Boomers even more so as their genY children inherit their house(s).
Onselen claims support from the BIS for his claimed hypothesis. This claim is false.
Onselen's claimed hypothesis is:
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In a nutshell, my hypothesis is that Australia’s baby boomer generation – which comprises roughly one-quarter of the Australian population but owns nearly half of the nation’s housing assets – will gradually become net sellers of Australian housing as they enter retirement, thereby acting to push down home prices in the process.
The essence of Onselen's hypothesis is that house prices will decline as a result of boomers actions. The BIS say the opposite:
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In sum, this paper found that ageing is likely to affect future asset prices substantially negatively, though asset price declines, let alone a meltdown, are unlikely.
No, they are not. You completely missed the point of my post. As generations age, SOME OF THEM DIE, which means that the generation shrinks in size (proportion) as they get older. Yes, life expectancy is increasing, but the life tables for pre-retirement age haven't varied that much, it's post-retirement that life expectancy has increased. Heart disease, cancer, auto accidents are all holding fairly steadily for those in pre-retirement.
I understood your point, but I haven't seen the math to prove that. You are saying that the BB generation was bigger at the outset than the following generations, but do you ahve the actual figures, and are you allowing for an immigrant intake that will boost X and especially Y.
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Really? You've met all of them? I guess having the highest suicide rate for young males for 100 years means that xNy are topping themselves out of happiness.
Well I only meet the ones that haven't suicided yet. Are you saying that they suicide because house prices are high, and other non economic factors such as drugs have no impact on the suicide rate. Perhaps you should look beyond houses and commute difficulties.
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No, I find the discontent among those who can't afford to buy a house, travel each day on abysmal public transport or drive an hour and half each day on shit roads. I have met a lot of my generation from all economic strata and I don't base my observations on one middle class suburb full of silver tailed bankers.
Well I'm in Brisbane where a BB, Gen X, or Gen Y can buy for $300,000 to $400,000 that are much closer than an hour and a half from the CBD, so perhaps we are seeing different situations.
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I think there will be a price crash that has nothing to do with Boomers retiring and everything to do with having the most ridiculously overpriced houses in the developed world. Having said that, retiring Boomers will change the property market, especially if they sell property to draw down on retirement savings, dying Boomers even more so as their genY children inherit their house(s).
An actuary could tell us the exact current life expectancy, but I would think that it is around 80 - so the BB generations shouldn't start to die en masse until after 2020 although the death rate will certainly ramp up from here. A great time to buy a funeral parlour or a crematorium.
BB's will die, and those homes will be sold, but if the population has risen then they will find willing buyers subject to economic conditions at that time. We need a population crash to bring about a house price crash caused by boomers dying.
I suspect that housing trends will cause booms and crashes in different geographic areas as technology and workplace conditions and requirements change. But that's just my thoughts, I may be wrong, and in fact we all may be wrong in the end. It's not possible to argue with absolute certainty until after the event, but it's interesting to speculate and hear other peoples thoughts as they also speculate.
but do you ahve the actual figures, and are you allowing for an immigrant intake that will boost X and especially Y.
I'm not allowing for anything happening in the future, only what has happened in the past. In historical terms, the BB generation is a very large generation (proportionally) heading into retirement. If you want to project a mass migration to Australia in the next 20 years, fine, but I don't see it happening without massive social unrest.
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Well I'm in Brisbane where a BB, Gen X, or Gen Y can buy for $300,000 to $400,000 that are much closer than an hour and a half from the CBD, so perhaps we are seeing different situations.
I've seen the salaries offered in Brisbane, and they are commensurate with those prices. Transport is better however than Sydney.
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An actuary could tell us the exact current life expectancy, but I would think that it is around 8
See for yourself: Life expectancy If you reach 60, life expectancy increases. This is admittedly unusual in a historic sense, but will add to the growing burden of supporting the BB generation through retirement.
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2020 although the death rate will certainly ramp up from here. A great time to buy a funeral parlour or a crematorium.
Now to 2020 should be a great opportunity in 'retirement lifestyle villages'.
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BB's will die, and those homes will be sold, but if the population has risen then they will find willing buyers subject to economic conditions at that time. We need a population crash to bring about a house price crash caused by boomers dying.
Less immigration, the population is in decline. We need an immigration boom to maintain population growth. It will probably happen. The Roman Empire was cut in half by immigration, and that really was the end for them.
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I suspect that housing trends will cause booms and crashes in different geographic areas as technology and workplace conditions and requirements change. But that's just my thoughts, I may be wrong, and in fact we all may be wrong in the end. It's not possible to argue with absolute certainty until after the event, but it's interesting to speculate and hear other peoples thoughts as they also speculate.
If we build a national broadband network, there is a real possibility of dispersal from cities, which is probably a good thing. We are coming to the end of the Mercantile Age, there is quite a way to go yet, but I think the trend will be for people to leave port cities and move inland. As you say, all speculation is probably wrong, but it's fun to imagine.
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Still think Newton's 2nd Law of Motion is a classed as a scientific "theory"?
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