Concern about not having enough saved for retirement is driving investment in property, new research has found.
Retirement is the most common reason for buying an investment property, according to research released by the Australian Institute of Superannuation Trustees (AIST).
Based on surveys, the research found that saving for retirement was important for 95% of property investors. Interviews with respondents showed a common theme of providing for a comfortable retirement and a belief that property was better able to achieve this than superannuation.
“Many see property as a better investment than superannuation – including those who don’t invest in it,” says the report.
“The interviews revealed a strong belief that investment properties were lower risk and delivered higher returns than superannuation. Property was seen as a concrete and tangible asset which will always be there, while superannuation (which was often assumed to be primarily shares) were seen as abstract, unstable, and lower yielding.”
“Houses grow, super doesn’t,” said one respondent.
Of property investors 52% believe investment property is a better way to save for retirement than superannuation, compared to 35% of non-property investors. But the interviews with people with a negatively geared property found a “near-uniform view” that property was lower risk and higher yield than superannuation.
People with negatively geared property also expect to go into retirement carrying debt. 62% of those with a property that wasn’t negatively geared expected to enter retirement without housing debt, compared to 33% of those with negatively geared property.
34% of negative gearers expected to carry over $100,000 of debt into retirement, compared to 11% of those with a non-geared property, and 8% of those without an investment property. 10% of negative gearers expect to carry more than $500,000 of debt into retirement, compared to 4% of non-gearers and 1% of those without an investment property.
“Carrying debt into retirement did not appear to be a significant concern among interviewees,” said the report.
48% of property investors expected to rely on their property to fund their retirement, at least in part. 65% of people without investment property expected to rely on the age pension in retirement to some extent.
Property investors also said they were more likely to make extra super contributions than people without investment property – 59% compared to 44%. Though the report notes that the interviews suggested this was something they planned to do in the future, not something they are or have done in the past.
79% of respondents said they were concerted that young people were being locked out of the housing market by rising house prices. 55% of non-property investors supported changes to negative gearing – even if this may cause prices to fall “slightly” – compared to 35% of property investors.
AIST CEO Eva Scheerlinck said it was time to reconsider the role of negative gearing and CGT concessions in housing.
“The long-held assumption that the home is a safety net for retirees is becoming increasingly dubious as more older people are being forced to rent or use their super to reduce their mortgage in retirement,” said Ms Scheerlinck.
The research was commissioned by AIST and conducted by Essential Media. It consisted of qualitative and quantitative surveys in March 2018, with 1000 respondents.