A new report from the Grattan Institute has revealed a growing crisis among Australian retirees: more are struggling to afford rent, with many at risk of homelessness. The rising cost of rent and falling homeownership rates mean that a significant portion of retired renters are being pushed into poverty.
We’ve previously discussed why owning a home in retirement is critical for financial independence, and this new report reinforces that message. Here’s what you need to know.
Key Findings from the Grattan Report
The report highlights that two-thirds of retirees who rent are either already in poverty or at risk of falling into it. Half of retired renters in Australia have less than $25,000 in savings—far from enough to sustain rent payments long-term. The poorest 40% of renting households aged 55-64 have less than $40,000 in net financial wealth.
Despite a 27% increase in Rent Assistance over the past two federal budgets, many retirees are still struggling to make ends meet. Nationwide, the average rent is $620 per week, driven by a housing shortage and a post-pandemic population boom. Age pensioners need at least $40,000 in savings just to afford $350 weekly rent, which only covers the cheapest 25% of one-bedroom homes in capital cities.
The Decline in Home Ownership
Owning a home before retirement is becoming increasingly difficult, especially for lower-income Australians. Over the past 25 years, the number of homeowners aged 55 to 64 still paying off a mortgage has surged from 14% to nearly 50%. For the poorest 40% of 45-54-year-olds, homeownership rates have dropped from 68% in 1981 to just 54% in 2021. This trend has affected all age groups, with fewer Australians managing to pay off their homes entirely.
One major reason? House prices have skyrocketed. The median house price in Australia is now $878,000. In Perth, the median home costs $843,000, while the average wage is $82,000 per year—making the average house nearly 8 times the average income. In the early 1990s, home prices were closer to 4 times the average income, making it far easier to pay off a mortgage.
Why You Should Pay Off Your Mortgage Before Retirement
Entering retirement with a mortgage can lead to serious financial stress. You may run out of super early trying to cover mortgage repayments, and 1 in 4 Australians use super withdrawals to pay off their mortgage. Many retirees also find themselves having to work longer than planned to keep up with repayments.
A fully paid-off home provides financial security and can later be sold to cover aged care costs. Australia’s retirement system favours homeowners, as the family home is exempt from Centrelink’s asset test, no matter its value. Statistics show that retirees who own their homes outright fare significantly better financially.
Strategies to Ensure You Own Your Home by Retirement
If you want to secure your financial future, consider these strategies:
Buying within your means is key to keeping repayments manageable. Aligning mortgage payments with your income—such as making fortnightly payments instead of monthly—can significantly reduce interest over time. Making extra repayments, especially early on, helps lower interest costs and shortens the loan term. Using an offset account wisely can save substantial interest when managed well.
Ensuring you have a competitive interest rate is crucial, so regularly reviewing your home loan and negotiating with your lender can help. When interest rates drop, maintaining your existing repayment levels rather than reducing them allows you to pay off your loan faster. If your current loan isn’t flexible, refinancing might be a better option. Finally, if you have significant home equity but still owe money, downsizing could be a smart financial move.
Final Thoughts
The evidence is clear: retiring as a renter in Australia is financially challenging. Homeownership remains the key to long-term financial security in retirement. With house prices high and homeownership rates declining, it’s more important than ever to have a plan in place to own your home before you stop working. By making smart financial choices now, you can set yourself up for a more secure and stress-free retirement.