Retired, Equity a plenty, Living off the pension.

Doubtful as you are leaving family.

The joke that goes around Melbourne is if you are looking at retire in Melbourne you sell up and buy in Hobart instant 500k if using medians.

 

True - family will always be a strong pull factor.

 

Why not? Sydney isn't considerably more expensive than other cities once you remove the housing cost from the equation. Heck, whenever I head to Melbourne or Sydney it blows my mind how cheap everything is in comparison to Perth.

1.5m would be 30 years of $50,000 a year they could draw down before needing to access the pension. That's an obscenely comfortable life to take you to the ripe old age of 100 (with retirement age now being pushed towards 70).

Retirement isn't something that should be taxpayer funded until it absolutely has to be. If you want to have a comfortable retirement where you can do what you want, you invest and save for it, that's the incentive. If you want to survive through retirement then plan to be on the pension.

It's a massive blackhole expenditure for the government, it's an expense that gives nothing back. It's basically the worst of government waste and to be doing any more of it than we need to is just obscene bleeding heart policy.

And yes, I understand the likelihood of change is minimal because we have pathetic government with no backbone and no interest in making this country any better that refuse to take control of an ever expanding deficit by making reasonable but hard decisions because of pure self interest.

I also understand there are plenty of other groups who should also be targeted by a government with a backbone to fix this country but that doesn't change that the aged pension is the single biggest expense that we have as well as one of the very fastest growing, it's just not sustainable and if that's not reason enough to fix it than we may as well just fold the country up and be done with it.

 

It's not necessarily about kicking people out of capital cities, it's about downsizing so that scarce land can be used by more people (i.e higher density living). They could still live in the same area but a smaller house or unit.

Adult children probably aren't living in the same suburbs as their parents most of the time anyway - they're likely to have purchased further out.

 

Yeah, not necessarily linking it to kicking people out, but rather postulating that a PPOR value cap that is standardised across Australia (rather than linking it to median etc of each area) might have a secondary effect of providing some incentive to move away from the prime real estate areas (ie land-heavy capital city inner suburb properties), for some people. Agree that the option of downsizing and remaining in the same general area is also available.

 

I don't see why there should be any different caps dependent on where you live. All other government benefits, thresholds, etc are one figure regardless of where you live. If people choose to live in Sydney then you accept that property prices are higher. $1.5m today is still a considerable figure even for Sydney and oldies could easily downsize or reverse mortgage with that much equity and still live very comfortably. It all comes down to this- it's your choice to live where you want, but don't expect tax payers to fund your lifestyle because you choose to live in $1.5m+ house and cry poor.

 

And, there is a very small pool of voters to try and please at the $5m+ end of town.

 

What happens though, in a few generations time, when those oldies who are the current younger folks moving into those areas as the oldies move out of their traditional family house on yer 1/4 acre block for eg, and make way for redev to high density, and they themselves have to downsize......

We will all end up "living in that shoebox in the middle of the road!"

If the whole suburb has turned into higher density blocks of units and townhouses; how can they move into something cheaper and smaller in the same suburb so as not to uproot the oldies and move them away from their families?

I think we might be heading for a land mass the size of Aus, but with Cap cities that look like Hong Kong or Manilla.

 

They dont have to be shoe-boxes, an 800m2 block can easily accommodate 8-12 spacious apartments. Most countries are heading this way. At least a dozen houses were ripped down in the one street I lived in in Zurich over 10 years and replaced with apartment blocks of 6-8 units. Sydney is only 400 people per square km, very low density (where I live now is 15000 people per square kilometer, maybe a bit extreme but Ok if you are up high, and there are still plenty of green spaces). With this sort of development suburbs can be transformed to accommodate many multiples more people. Higher density also enables more economic and efficient transport systems to be developed.

But from my perspective I would not want the PPOR to be included in the assets test, my mum would definitely have to leave her house in Australia which they built in 1969. Just let things evolve naturally and free up development restrictions for houses as they become available. The "NIMBY" phenomenon blocking development is more of a problem than oldies continuing to live in their houses.

 

Casteller; the shoebox bit was a joke.

(Monty Python "Four Yorkshiremen" sketch - but in reverse).

But; can see what I mean; if all these old flks have to "scale down" to smaller places now to make the FHB's happy etc.....

how are the future oldies going to "scale down" even further?

 

No, they wont have to scale down. The next generation of oldies will already be living in smaller places than we are now, so they wont have to move anywhere. The land will already be subdivided into smaller townhouse and apartment blocks.

What I see happening in Sydney and Melbourne and to a lessor extent Brisbane, is as the oldies pass away, their properties will gradually become medium density. The future population will grow into these homes so in twenty years' time, we wont have any housing affordability issues. I will probably be broke because my purchases were made assuming a continuation of living styles from past decades, but the nation as a whole will be better off.

 

I think the "having to downsize thing" is part of the mentality of why this problem doesn't get fixed.

There needs to be a fair way so that downsize is an option not a requirement. Reverse mortgage makes the most sense to me. Have it government administrated, make it interest free or indexed to inflation similar to HECS) and have it available.

Personally I also think that the downsize option isn't a great one though and we should also be making this is desireable as it can be. Step 1 is for the states to remove stamp duty because this cost is significant enough that it will stop many doing it. If we aren't going to get rid of it altogether as we should then we need an exemption for anyone of pension age who is buying a smaller house to free up their equity to live off. We avoid the pension which is significantly more than the stamp duty would be and you still collect it from the person buying the bigger house if they refuse to remove it but we make the downsize option more viable.

Right now there is zero incentive to downsize. You pay stamp duty, you turn exempt PPOR equity into means tested cash and you've got the whole inconvenience and emotional attachment thing to overcome. By including the PPOR in means testing and removing the stamp duty you basically leave it to sentimental reasons to not downsize and, imo at least, that is the only barrier that should exist.

The problem with this discussion is that it rapidly turns to emotion because everyone had a sweet old granny or a doting grandfather that they remember so pulling heart strings on this topic is very easy and once emotion seeps in, logic seeps out. The simplest fact is that Australia can't afford to keep paying pensions at the rate we are, so we either have to cut the level of the pension severely, which basically crushes those who need it most, or we need to find a solution that results in less people receiving welfare. When you've got wealthy (and they are the targets here) people receiving welfare you've got a flaw in the system, the mission needs to be to find an equitable way that isn't punishment or excessive, just a reasonable method for them to pay their own way.

 

Marcus Padley has an article in July Money Magazine about old people who "feel" poor.

E.g. you are a couple, both 80 years old and have a $1m paid off house and $1m in shares.

You live off $45,000 dividends and feel poor, because your mindset is never to touch capital.

Assuming you both live to 100, you could spend down the capital you have in shares and live off $95,000 a year.

Spend down the capital in your PPOR and you could live off $145,000 a year.

No point the being the richest you will ever be when you're old and decrepit at 100 and too old to enjoy it.

 

The simplest fact is that Australia can't afford to keep paying for kids education.
The simplest fact is that Australia can't afford to keep paying for medicare.
The simplest fact is that Australia can't afford to keep paying for defence.
The simplest fact is that Australia can't afford to keep paying for <insert your gripe>

 

This is correct.

The real question though is what is a better place to start with cuts? Welfare to the wealthy or the education of our future?

Health for everyone, including the wealthy, or again, a welfare system paying to the wealthy.

For me the fundamental point is the meaning of welfare, that being "statutory procedure or social effort designed to promote the basic physical and material well-being of people in need." The last part is the key, people in need. It's not people in want, it's not a reward for having done the right thing. It should be reserved for those who have nothing else, those who genuinely need it. Having people with millions in assets draining funding is, imo, absurd.

And yes, I'd be targeting a whole bunch of other areas of waste as well. The superannuation system that has become predominantly a tax concession to the wealthy. The absurd defence budget. Welfare from top to bottom. The war on drugs and the absurd amount it costs to not work at all. The list goes on and on but the reality is every dollar we waste on these blackholes that don't have a positive return is a dollar we can't spend towards infrastructure, innovation, education, health and those things that truly make Australia better. I just don't agree that giving money to millionaires does that.

 

For me, it is people in genuine need.

I don't believe we should make it easy for people who "manufacture or fabricate a need" to automatically get welfare.

I have a number of relatives and friends who are manufacturing/fabricating their need so that they get/will get the dole, the pension or whatever because it is easy for them to do so. Little to no responsibility; we shouldn't encourage them to do this. I would rather we inspire them to do the opposite and take personal responsibility for their futures.

 

Best place to cut is welfare for the "unemployed". Cut that and you would get more productivity, less crime, and more money that could be out towards education.

 

You cut the dole and people still need to live so they will resort to stealing to feed their kids so crime goes up.

 

I agree that the dole should be smaller and harder to get and stay on but the dole is minuscule in comparison to the aged pension, we spend 4x as much on the aged pension as we do on unemployment and it's growing at roughly twice the rate, it's also far easier to fix a welfare payment going to people with the means to easily support themselves for 20-30 years without causing the social ills that @Big Will has mentioned in his post above than targeting those with nothing will cause.

Welfare is a blackhole and I agree with what you're saying but to fix that relatively small expense is a far more difficult equation. It's not a case of getting the wealthy to pay their own way instead of living off the government teat like a significant portion of the aged pension. If it was up to me you'd have to put in 50 hours a week in work for the dole programs to qualify for the dole so don't get me wrong but it makes sense to fix the obvious and easy problems that have the biggest payoff first. You try changing a globe when it goes out before you call an electrician to rewire the house and install a new light right?

Fixing the aged pension excess is very simple (relatively at least). You remove the exemption to means testing (I'd set the net asset test at the median house value of Australia and be done with it but it wouldn't take much to determine a fair level here) and you setup an equitable process so that they can access the equity in the house without being forced to sell or downsize (simple indexed reverse mortgage), given my strong disdain for stamp duty I'd say get rid of it altogether but initially at least you could provide a downsizer exemption as well if you really wanted to encourage that economically positive action.

Really, there is government waste on government waste in Australia and we've had such worthless governments for a decade that it's just compounding on itself at this point because no one is willing to even attempt to fix it (well to be fair Abbot did try and he got turned on more viciously than Julius Caesar as a reward!), sure taking the easy option is going for the low lying fruit but we need to start somewhere or we're rapidly headed towards what's happening in Greece.

 

Idiot.