Many elements of Australian society are developed on the premise that people will own a property outright by the time they retire. However, owning a property is not desirable or achievable for a range of current renters.
For many long-term tenants, continuing to rent their current residence limits their ability to save for a purchase deposit; for others, their loan capacity restricts the locations available for them to purchase. If owning a home to live in isn't an option, how can life-long renters ensure future financial security?
Brooke, 29, currently rents in the Victorian suburb of Glenroy: 'I was fortunate to support myself through university and gain full-time employment straight after graduation. Even though I have a secure career the increasing cost of rent has made it impossible to save, let alone afford a deposit on a house." With many banks restricting borrowing above 90% of a purchase price, a similar two-bedroom unit in the area would require almost half of her annual income. 'I am worried for the future, but for now I am just concentrating on making ends meet," says Brooke.
Brooke's situation is not an isolated event. In the past, only 25% of renters were considered to be life-long tenants, whereas current statistics place the number closer to one third. With rental prices continuing to climb, the ongoing expense of renting throughout retirement has the potential to exhaust a tenant's financial capacity quickly.
Many financial planners will say the safest way to generate additional future income is to open high-interest savings accounts. The problem with bank savings though is that inflation rates are quickly overtaking interest returns. The stock market has often proved a much more financially lucrative-option, however it can also produce a massive black hole due to the temperamental nature of the investment.
Superannuation is a relative safe long-term option with the added benefit of potentially reducing your income taxation requirements. A commitment to contributing an additional amount or percentage of your income should be viewed with the same urgency as paying rent in order to grow a nice future nest egg.
Mark Ribarsky from Wise Real Estate Advice suggests renters should consider the option of rent-vesting. 'Rent-vesting is becoming increasingly popular for tenants with the capacity to save a small deposit to purchase a home in an area they don't intend to live in, but can pay off with the rental income generated", says Mark. Although, property ownership is by no means a guarantee for future financial security, rent-vesting creates an opportunity to own a house outright to finance living costs in the future.