The Griffith University paper The Potential Role of Housing Equity in a Looming Baby Boomer Retirement Cash Flow Crisis, co-authored by Dianne Johnson, Andrew Worthington and Mark Brimble, analysed confidential data contained in the Household, Income, and Labour Dynamics in Australia survey (HILDA).
The paper noted that some retirees do not have sufficient asset liquidity to finance their post-retirement consumption needs – despite the fact households may already hold substantial assets in the form of housing equity.
According to the HILDA data, the primary home makes up over two thirds of all net worth for respondents aged over 45 – despite 30 years of the superannuation guarantee.
The paper acknowledges total superannuation assets have reached $1.6 trillion, but it points out that the value of home ownership in Australia currently exceeds $4.25 trillion.
“The family home has the potential to undergo a revolutionary change from a direct investor private financial asset to a more flexible, and even securitised,financial instrument,” said the paper.
Products like reverse mortgages, reverse annuity mortgages and the option of 'downsizing' already exist, said the paper.
“In 2013, a new 'fractional investment' product [DomaCom] emerged that enables investors and property owners to trade fractional investments in real property represented by units in a fund linked to a specific property of their choice,” said the paper.
“Recently, research has turned to new financial instruments to increase options for funding housing, such as 'housing supply bonds', albeit for the purpose of channelling private investment into the affordable rental market,” it said.
Speaking to InvestorDaily, Ms Johnson said despite a healthy market in Europe, there are government and industry barriers to a housing supply bond market in Australia.
“It’s an unknown investment class in Australia without a track record – particularly post-GFC,” she said.
“[With that in mind] I can imagine why institutions would shy away from a new investment class. There’s also uncertainty about the government's support,” said Ms Johnson.
But the government has a strong incentive to support such a market because freeing up equity for retirees would mean a reduced burden on government services, she said.
