Monday, June 07, 2021

‘Grandparents need the backyard’: Boomers deepen housing crisis by staying in empty nests

This is an old controversy. Should an eldery couple be allowed to keep the home they built to accomodate a family? Economists point to it as an inefficient allocation of resources and say the old couple should sell up.

Forcing that however would be a major denial of property rights and would generate great resistance. So the problem is likely to remain in in some form

There is a of course the California solution: Set property taxes so high that it would strain the resoures of retirees and thus give them an economic incentive to move. We all know the response of Californians to that, however: Proposition 13, an immensely popular initiative that capped property taxes to more affordable levels. So high taxes will be strongly resisted too.

The most that could be done would be to eliminate some of the high costs of moving -- such as taxes on the sale of property.

A well-located family home in Sydney has become a hotly contested prize. At auctions each weekend buyers fork out millions of dollars for one. But a growing share of those family homes are not actually occupied by families.

As the population ages and lifespans lengthen, older couples and singles are staying put in spacious dwellings for longer.

That means fewer family homes in well-located neighbourhoods become available to those they were designed for: couples with young children. As a result, an army of prime-age workers and their kids must settle a long distance from the city’s most dynamic job hubs, such as the central business district. Others opt for a small home closer in, or resign themselves to forever renting close to work.

“If older residents ‘occupy the crease’ it makes it harder to house new younger families in those locations close to jobs,” says Terry Rawnsley, an urban and regional planner at KPMG.

This housing mismatch is already creating social and economic challenges and is set to become more acute as the ageing of the population accelerates.

So many reasons to stay put

Lilyfield empty nester Dana Reed knows running a large, underused home is costly but can’t see a better alternative.

From an investment point of view, she said she was better off parking her money in her four bedroom house than in the bank. But beyond financial reasons, she wants to hold on to the home for her children.

“It’s always a worry if they can’t get onto the property ladder. We want them to have somewhere to come home to,” said Mrs Reed, 53. “I’m struggling to find a reason why we would either downsize or move out that’s not us moving out to a retirement location.

“From my point of view, we’ve got a lot more options by hanging onto the place as long as we can rather than downsizing or doing something before we retire in full.”
Henny Stier, principal buyer’s agent at OH Property Group, says the cost of childcare is another reason many Baby Boomers hold onto the family home.

“With childcare being so expensive, there are a lot of people who are taking care of grandchildren so the grandparents do need the backyard, the spare bedrooms,” Ms Stier said.

Rebecca Bissett owned a home in Epping until last year but still chose to move to her parents’ place in Hunters Hill with her husband and three children while they searched for an appropriate housing upgrade.

“Instead of renting, my parents have a really large home and we thought we’ll move in with them. We were wanting to upgrade in the Putney [and] Concord area,” Ms Bissett said.

Terry Rawnsley says the lifestyle preferences of Sydney’s retirees have shifted. “In past generations, as people hit retirement age they were thinking about moving up the coast or into a retirement village, and when that happened it opened up housing for new people to move in,” he said.

“There are still some people doing for sure, but in the current Baby Boomer generation more people seem to be staying put because of the lifestyle it provides, like the cafes and other amenities ... they seem to be more tied to an urban lifestyle than perhaps previous older generations were.”

Rebecca Bissett said her parents, who are retirees, have no intention of downsizing because they love their space and the neighbourhood.

“They’re in good health. They’re only young themselves, in their 60s and they’re in a good area. They don’t want to move,” she said. “I don’t envision them ever selling the home. They built that themselves. It’s their dream home.”

“For many, retirement is the trigger to shift from the empty nest family home but that is being delayed because in a knowledge economy older people can keep working a lot later in life,” said social researcher, Mark McCrindle.

The high quality health services in inner Sydney are attractive, and there are also many barriers to downsizing.

A recent Grattan Institute report on housing affordability concluded the failure to build more medium-density housing in established suburbs means older people lack downsizing options in their local area.

Tax and welfare settings also discouraging empty-nesters from moving.

Because primary residences are not included in the age pension means test, pensioners may lose some or all of their pension if they downsize. Another disincentive is stamp duty on the purchase of a smaller home. A NSW government proposal to replace stamp duty with an annual land tax aims to reduce disincentives for moving, although this change has not yet been implemented.


Australian lobsters back on the menu as Chinese 'grey trade' fires up

Australian lobster fishermen shut out of mainland China appear to be selling millions of dollars' worth of crayfish to the once-booming market via unofficial "grey channels", trade experts say.

Commercial fishers across the country were left reeling in November when China appeared to impose an unofficial ban on Australian lobster exports that had been worth hundreds of millions of dollars.

The suspension effectively stopped the trade with China, which had been buying more than 90 per cent of lobsters exported from Australia.

But figures released by the body representing Australia's biggest lobster fishery in WA show a sharp rise in export volumes thanks to the so-called grey trade.

The term refers to the distribution of goods through indirect channels.

According to the Western Rock Lobster Council, crayfish exports from WA to Hong Kong rose from negligible levels last October to more than 300 tonnes in March.

There was also a significant jump in shipments to Taiwan, though it is understood much of that demand was driven by the lower prices for lobsters.

Dr Scott Waldron, a senior research fellow at the University of Queensland's school of agriculture and food science, said it was "highly unlikely" that increased consumer demand in Hong Kong could account for the sharp rise in exports to the territory.

Dr Waldron said it was more likely that Hong Kong was being used as a port to reroute exports into mainland China.

"Maybe if lobster is cheaper then consumption in Hong Kong might have increased a bit, but not nearly to the magnitude you're talking about," he said.

"So the vast majority of that would be transhipped through Hong Kong and then taken over the border as informal imports through this grey trade."

Though grey trading had become less prevalent since the introduction of the China Australia Free Trade Agreement in 2015, Dr Waldron said many other commodities, including lobster, had been sold to the world's biggest market through unofficial channels in the past.

Among them were wine, citrus, mangoes and beef, he said, while bulk commodities such as timber and sugar had previously gone through conduits including Myanmar.

With Australia and China's relationship strained, Dr Waldron said there was a chance grey trading could increase in other commodities as well.

Trade expert Jeffrey Wilson, from the Perth USAsia Centre, said exporters typically resorted to the grey trade when trying to avoid "some kind of government-imposed trade barrier".

After 12 months of the trade war, Australian farmers and miners are warned that relations with China may not normalise — but many have already started to find success in new markets.

Mr Wilson noted many Australian agricultural producers had been hit with trade strikes from Beijing in the past 12 months and that there were "no good alternate export options to China in the short term".

He said grey channels were often the only way exporters could "keep their connections with Chinese partners alive while sanctions are in place".

"While there are many ways to do it, an illustrative example is 're-exporting'," Mr Wilson said. "If you cannot export a product directly to the desired market due to a trade barrier, you instead export it to a third country, get it repackaged and issued with a new certificate of origin and then sent to the desired market."

Grey channels 'not illegal'

Mr Wilson stressed that such trade "circumventions" were not illegal and should not be confused with "black trades", which involved corruption such as bribery or false declarations.

But he said grey trading tended to be "frowned upon under international trade law".

"As it undermines the intent of trade policies, many trade law instruments contain provisions allowing governments to prevent circumvention from occurring," he said.




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