Increasing life expectancy underlines need to invest in property for retirement

The growing life expectancy of Australian highlights the need for people to ensure that they do not rely purely on superannuation to fund their retirement according to David Hobbs, CEO of Professionals Real Estate Group.
Mr Hobbs said that over recent decades, life expectancy rates of Australians have been increasing so people are now expected to live an active life long after their retirement.
“According to United Nations estimates, Australia has the joint fourth-highest life expectancy in the world (equal with Switzerland) over the period 2005 – 2010 when ranked by male life expectancy (79 years). Only Iceland, Japan and Hong Kong have higher male life expectancy than Australia. Advances in medicine and improvements in lifestyle mean that this generation now has the prospect of living much longer than previous generations. This means that we need more money to fund our retirement as we are living much longer and staying healthier. Relying totally on superannuation to fund your retirement may not be enough given longer life expectancy rates, particularly with the current relatively low level of contributions made by most average income earners. In contrast, an increasing number of people are investing in real estate to ensure that they have enough income to fund their retirement. These people recognise that, by investing in well located real estate, they can enjoy the prospect of their investment increasing in value over the long term.”
“Over the last 30 years, for example, the median price of a home in Perth has increased from around $38,000 in 1980 to around $480,000 in 2010 – representing a more than 12 fold increase in property values over the past three decades. If an investor just purchased an average property thirty years ago for $38,000, they would now be reaping a capital gain of more than $440,000 – a sum which many people fail to save over a life time of working. This capital gain does not include the significant increases in weekly rents that have also occurred during this 30 year period. Astute investors who purchased properties in high capital growth areas would have achieved even greater levels of capital growth over the 30 year period. For younger people looking to ensure their long term prosperity, investing in property is an attractive option to supplement their superannuation contributions. There have also been recent changes to superannuation laws which make it easier for people to use their private self-managed superannuation funds to invest in property. Over the longer term, the outlook for the Western Australian property market remains very positive, so investing in property as part of a retirement plan should be given serious consideration as a form of long-term wealth creation. In the current real estate market, there are excellent opportunities for astute investors to purchase well-located properties in affordable areas which should deliver high rates of capital growth and rents over the long term,” he said.
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