This article is from the Australian Property Journal archive
RETIREES who rent rather than own a debt-free home are at a significant disadvantage and will need to have more than $1 million in superannuation.
It comes as no surprise that Sydney is the most expensive city, with single or couple retirees renting would need more than $1 million in super savings.
According to the latest Retirement Standard report by the Association of Superannuation Funds of Australia, retiree couples living in all other capital cities also need to save more than $1 million in super, whilst singles requiring less than $1 million.
ASFA CEO Dr Martin Fahy said whether single or in a couple, renting retirees in Sydney, that is those without a debt-free family home, were at a distinct financial disadvantage and would need about $1,045,000 and $1,166,000 at retirement respectively to reach the ASFA comfortable standard.
“This compares to $545,000 for a single and $640,000 for a couple who own their own home.
“For a single person renting privately in Sydney, around $320,000 is needed to support even a modest standard of living in retirement, with a couple needing around $450,000 to support a modest budget,” he pointed out.
Dr Fahy said one in 12 Australians aged more than 65 live in private rentals.
“Housing affordability and availability is a significant and increasing concern for many Australians and particularly impacts older Australians grappling with the private rental market,” he said.
ASFA estimates a single retiree renting privately in a one-bedroom unit in Sydney will need to spend $62,434 annually to be comfortable and a couple renting a two-bedroom unit will need to spend $79,801.
By comparison, ASFA comfortable retirement standard annual budgets for home owners in Sydney are around $43,300 for singles and $59,600 for couples.
“All estimates assume people are enjoying reasonable health, so any serious illness or disability makes the situation even more challenging, as does rental instability and associated costs,” Dr Fahy said.
The ASFA report found Sydney is one of Australia’s more expensive cities for renting, but average rentals for one and two bedroom apartments in inner and middle rings of Canberra, Melbourne, Darwin, Brisbane and Perth would not be dissimilar. For example, rents in Melbourne are slightly lower on average than in Sydney.
At the modest level, a single retiree renting privately in the outer ring of Melbourne might pay a weekly rent of $300 a week while a couple might pay $360. For a single retiree at the comfortable level renting in the middle ring the rent would be around $370 a week while for a couple the rent would be around $400 a week. As a result the lump sum at retirement needed for a couple who are renting privately in Melbourne is more than $1.1 million to be comfortable and around $940,000 for a single retiree.
Rents for apartments in Adelaide and Hobart tend to be a little lower on average, particularly in outer areas of those cities. Substantially lower rents can be the case for regional cities and towns.
Retirees renting – couple
| Modest lifestyle annual expenditure – couple | Modest lifestyle – lump sum needed at retirement | Comfortable lifestyle annual expenditure – couple | Comfortable lifestyle – lump sum needed at retirement | |
| Canberra | $48,610 | $376,000 | $78,910 | $1,150,000 |
| Sydney | $51,570 | $450,000 | $79,801 | $1,166,000 |
| Melbourne | $49,402 | $396,000 | $77,472 | $1,115,000 |
| Brisbane | $49,368 | $395,000 | $77,342 | $1,112,000 |
| Adelaide | $45,495 | $300,000 | $73,447 | $1,015,000 |
| Perth | $45,627 | $300,000 | $73,779 | $1,022,000 |
| Hobart | $45,396 | $295,000 | $73,514 | $1,016,000 |
| Darwin | $48,653 | $377,000 | $75,837 | $1,074,000 |
Retirees renting – single
| Modest lifestyle annual expenditure – couple | Modest lifestyle – lump sum needed at retirement | Comfortable lifestyle annual expenditure – couple | Comfortable lifestyle – lump sum needed at retirement | |
| Canberra | $38,121 | $352,000 | $59,729 | $977,000 |
| Sydney | $36,851 | $320,000 | $62,434 | $1,045,000 |
| Melbourne | $37,033 | $325,000 | $58,200 | $940,000 |
| Brisbane | $37,033 | $325,000 | $58,143 | $940,000 |
| Adelaide | $33,741 | $243,000 | $54,551 | $848,000 |
| Perth | $33,483 | $236,000 | $54,979 | $859,000 |
| Hobart | $33,794 | $245,000 | $54,992 | $859,000 |
| Darwin | $36,768 | $320,000 | $57,323 | $917,000 |
“Compulsory superannuation contributions at 9.5% fall well short of what is needed to support a comfortable standard of living in retirement for anyone renting privately,” Fahy said.
Currently around 75% of households with the household head aged 65 and over own their home outright, 8% are still paying off a mortgage and around 8% are renting privately.
Housing affordability is a particularly serious challenge for residents of Sydney. Around 65% of Sydney residents are home owners by the age of 60 compared to just under 80% for the rest of the country.
Australian Property Journal
