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The Great Economic Puzzle Called “Retiring Baby Boomers”

property bubbleMichael Yardney, while writing a piece for the Property Update, dismisses the idea that we will have a property market bust when the Baby Boomers begin to retire. Yardney delves deep into the puzzle and while he appreciates the phenomena- which the retirement of a 5.3 million strong workforce will be- he infers at the same time that the property market will keep up with its buoyancy and there are plenty of reasons to feel so.

Baby Boomers will still need a home

As a first, most baby boomers won’t sell their properties on retiring. After all, will they suddenly become fragile on the day of their retirement and seek nursing care immediately? That certainly will not be the case and if they remain fit and active, they will still need a home to live.

To come back to the genesis of the argument, they won’t start selling their homes in big numbers on retirement. Many of them would like to continue with the next phase of their lives right in the place where they had been living for decades. This still might mean that they plan to downsize but preferably in their existing neighbourhood.

Their mass downsizing bid will only help developers (and economy)

Their downsizing into a new-age apartment won’t pose a threat at all. For one, it will give a fillip to developers who can then use these very lands to create modern duplexes and apartments (thus helping our economy).

5.3 Million is a huge figure

Yardney does not live in denial. He agrees that the figure 5.3 million for Baby Boomers represents a huge demographic shift but it should not be equated with a Tsunami. 43% (or nearly half) of the workforce retiring in the next 15 years presents a scenario where suddenly the taxpaying citizens will diminish a great deal.

In addition, government will have to cater to their health care expenses and pensions. While it is likely to affect the government exchequer, the Federal government will have enough on board to compensate for the Baby Boomer effect.

Solution to the Baby boomer retirement issue

As part of the solution, it can either increase the taxes levied on the working people or import young and skilled working class. Such migration will help build our industries better and offer the very migrants a scope for better life. In due course of time, on finding their footing, such skilled (and young) working class will pay taxes and offset the loss in tax revenue on account of retiring Baby Boomers.

Mad rush for the capital cities

The growing Australian population will mean that we add about 60% to our existing tally in next 30 years or so. This new population will spend money unlike the Baby Boomers and hence contribute to the economy. With more people getting inclined towards capital city lifestyles, supply and demand ratio will see to any threat posed by the retiring army of baby Boomers.

You can read the original article here.

In my opinion, monumental though the numbers are (5.3 million), we are making a mountain out of the issue. The Baby Boomers won’t just say we quit one fine morning and move to Mount Sinai. They will keep retiring in phases giving ample time to the government to make moves which restore equilibrium.

I also feel very strongly that our capital cities would by then have such chronic population issues that properties will be at a premium (despite a rush of development properties) and their great demand will be the best possible counterargument to any thoughts of property market bust.

What impact do you feel the baby boomers will have on the Sydney property market?