It's becoming clearer that housing affordability, particularly in Sydney and Melbourne, has wider implications than just for those trying to get a foot on the property ladder.
Skyrocketing house prices are increasing the gap in living standards in retirement between those who own the property they live in and those who rent. And the gap is likely to widen.
![Retiree renters are unlikely to be able to afford a comfortable retirement.](/web/20170401031648im_/http://www.brisbanetimes.com.au/content/dam/images/g/s/s/w/z/q/image.related.articleLeadwide.620x349.gv5r5u.png/1490662004926.jpg)
Home ownership in retirement is important not only because the retiree is not paying rent or making mortgage repayments but because of the privileged position it has within the tax and superannuation systems.
Not only is capital gains tax not paid on the sale of the family home, but it's not counted in the assets test for the age pension.
The penalty in lifestyle in retirement from not owning a home is greatest, not surprisingly, in Sydney and Melbourne, where house prices and rents are highest.
The Association of Superannuation Funds of Australia (ASFA) figures show a Sydney home-owning couple needs to have saved about $640,000 to support a "comfortable" retirement from age 65.
Sydney retiree couples who rent need about $1.17 million – or more than half a million dollars more!
Melbourne retiree couples need about $1.12 million for a comfortable retirement from age 65.
However, a Melbourne home-owning couple needs to have saved $650,000, or $10,000 more than their Sydney counterparts.
ASFA says most of the reason for the difference is the higher costs of rates, building and contents insurance and home improvements and repairs in Melbourne than in Sydney.
The problem for renters is most acute in Sydney.
ASFA estimates a couple renting even a two-bedroom unit in Sydney needs $79,800 annually to be comfortable.
Unless the renters happen to be very high-salary earners, they have virtually no chance of affording a comfortable retirement.
By comparison, ASFA estimates a comfortable retirement costs a home-owning couple $59,800 a year, nationally, on average.
Another report, from the Australian Institute of Superannuation Trustees, also highlights the danger of house prices that are too high. The report says more retirees are likely to be renting in the future or still paying off their mortgage.
The proportion of households who own their homes has been in decline for sometime.
The report's author, independent economist Saul Eslake, says that young and middle-aged householders, age 25 to 54, have experienced the worst falls in home ownership.
"The upward trend over the past 25 years of younger householders renting suggests that a higher proportion of retirees will be living in rented accommodation in the future," he says.
There are important caveats with the ASFA numbers on how much is needed for a comfortable retirement.
They assume reasonable health. Any serious illness or disability would see the amount of retirement savings needed for a comfortable retirement rise even further.
And, of course, it's not only the cost of the rent, but the lack of security when living in rented accommodation that can be particularly worrying in older age.
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