What about the Baby-Boomer Effect?

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Yesterday, the Federal government released Australia’s third Inter-generational Report.

And about five years ago, I came out with a somewhat startling statement:

“If you haven’t sold your traditional family home by 2010-11 … you had better be prepared to hold it until 2025 — because there simply won’t be a market for it!”

Chatswood ... Sydney

Chatswood … Sydney

And given the recent surge in home sales (particularly in Sydney and Melbourne) over the past 6 months … you would be excused for thinking my prediction might be way off the mark.

But let’s take a closer look at things.

So, what has changed?

The global financial crisis impacted the housing market in several ways:

* Initial concerns caused people to defer any buying or selling for a period, until they knew the economy (and their job) was not at risk.

* The pent-up demand was then fuelled specifically by the First-Home-Buyer’s grant; and generally, by the government’s incentive package.

* With record low interest rates, would-be tenants suddenly found it cheaper to buy rather than to rent.

Bardon ... Brisbane

Bardon … Brisbane

This artificial stimulus to the market is now being wound back; and any interest rate rise will curb buyer activity.

Add to that the trend, where Gen-Y children seem to be staying at home longer — sometimes well into their 30s.

What hasn’t changed though, is the Australian demographics for Baby Boomers. And 2010 is the year when the first of them start turning 65 years old.

But unlike their parents, Boomers will not wait until they are about to be carried out of their present homes, before deciding to move.

Kew ... Melbourne

Kew … Melbourne

No, they see the next 20 to 30 years as a new chapter in their lives — where they’ll want to downsize and start living for themselves.

Sure, they may need to prise the kids out with a crowbar. Or maybe, just move to an apartment or a townhouse … with a couple of spare bedrooms.

Either way, they are about to start their decision process; and will be doing it en masse.

And therein lies your dilemma, when it comes to selling your traditional family home.

It is not there will be any fewer buyers. Rather, that there will be about five times as many of these types of properties on the market, over the next 15 years or so.

St Peters ... Adelaide

St Peters … Adelaide

Understand that you’re certainly not talking about “Trophy” homes here.

It’s principally those 3 to 5 bedroom homes in the inner-middle suburbs of Brisbane, Sydney, Melbourne and Adelaide — within the $1 million to $3 million price bracket.

Historically, your family home has been considered a de facto part of your superannuation. However, as a Baby Boomer … that could well prove to be a myth — unless you downsize the early, and beat the rush.

All the financial crisis has done is delay the start of this process a year or two.

NEXT WEEK: The huge impact this could have on Commercial property!

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