New Zealand has got an aging population. Why? Well because of the Baby Boomers.
Baby Boomers are of people born in the ages of 1946 (just after WW2) to 1964. Over one million babies were born at a rate of about one hundred thousand per year, when New Zealand’s population was just 2.5 million. This boom has moved through society and has had a very significant impact at every stage. Today the ‘boomers generation makes up one quarter of New Zealand’s population and the bulge has not levelled out.
Today baby boomers having completed their own family cycle with the expensive years of bringing up children behind them, are mostly at the peak of their earning years often with both partners still working. But unlike their own parents, this group has lashed out lavishly on personal consumption. Not for them the discipline of saving and going without as a run up to their own retirement. These people have done the exact opposite to their parents and have built huge new homes for themselves, have purchased other holiday property, lifestyle blocks or apartments and have filled their garages with all sorts of toys like 4×4 trucks, boats, Harley Davidson’s and classic cars to name just a few.
Predictably, as the ‘boomers built or bought their dream homes, these properties skyrocketed in value. With a million ‘boomers all buying property at roughly the same time, it was no wonder that prices escalated.
Here are some facts about baby boomers and their real estate trends as we know it today.
? Ninety-six percent of all boomers believe that owning a home is a very smart financial investment, and nearly 4 out of 5 now own homes, while 1 in 4 boomers owns other forms of real estate besides a primary home. These include one or more vacation or seasonal retreats, acreage or income-earning property.
? Home equity plays a huge role in boomers’ financial planning and well-being.
? Home equity represents a significant percentage of total household net worth for most boomers. Thirty-six percent of 50-year-old to 60-year old homeowners report that the equity in their primary residences is 51 percent to 100 percent of their household net worth. Thirty-eight percent of boomers between 42 and 49 report the same.
In terms of today and looking toward the future the trouble is there are very few ‘families’ coming along behind them. As most of the baby boomers were born in the 1950’s, during that time everyone who could have children had children. This meant that in the 1960’s there was a 10 year gap in babies been born, during this time very few new babies were born. This gap is still there today. For real estate does this mean the demand for houses that the baby boomers don’t need any longer is going to drop off dramatically.
So as the baby boomers start to retire from their big family homes, farms and lifestyle blocks there possibly will naturally be a large decline in this market, but where do they go from there? Maybe this is the foresight to the next real estate market niche to boom.
The next generation (Gen-X born 1964 – 1980, essentially the children of the baby Boomers) and their much smaller families are not only significantly smaller in number but they have a completely different criteria for their housing needs. Another interesting fact I read was that only 18% of New Zealand’s population now live in a ‘nuclear family unit’ with Mum & Dad and their children living under the same roof. Society has changed dramatically. But I will Talk about Generation X my next post on the generations. So keep watching.
Deon Swiggs
Property Profits
Deon,
You make some very relevant comments. This bulge in population will have serious impact not only on demand for property in general, but also the type of property – especially in regard to baby boomers downsizing.
Despite this I think there is a very important note to make in regard to the baby boomers. Unlike their parents this generation is very unlikley to ‘retire’ in the sense of what their parents thought of as retirement – they either as a function of the circumstances you highlight above or by default of their desire to ‘never grow old’ they will likely remain within the army of eaners well into their 60’s and potentially 70’s – this will be an impact that will change many peoples view of these issues.
Yes My thoughts on this longer term are of probably somewhat different to some but I believe what could happen is until the baby boomers are forced due to ill health and other things they will hold onto their properties. And I agree with what you say that the baby boomers will remain workers till possibly thei 70’s. But I think it will be an interesting time for all of the economy when the baby boomers from that generation do start downsizing, when they start I imagine there will be a huge influx.
It could be a good time to invest in a retirement home.
As always, just enjoy your blog
Thanks Peter.
These issues are mirrored throughout the world and involving every country that played a part in WWII. In New Zealand we also have a huge skills shortage and as more of the ‘Boomers’ retire it is only going to become worse. One would wonder if the Government is planning to address these issues, perhaps doing more (something!) to encourage our newly skilled graduates to remain in the country and/or allowing qualified immigrants in – and recognising their qualifications so they don’t end up driving taxis or serving hamburgers.
Your right. WW2 has had a huge impact on the world and the ripple effect is going to be felt in the upcoming years. I agree with you about our trade shortage. New Zealand does have a problem here. I am in the age group of people who are just starting to qualify and graduate and more than half of my friends that do that are going over seas to work. Most of them head over to Australia for better jobs etc. “Even I have considered it to make a quick few thousand”. But at the end of the day it all comes down to money. Money controls peoples emotions and what they do.
One thing that Australia do well is their immigration policy. Where we have an aging population Australia has a population that is getting younger because of their policy to allow young skilled workers in.
Will be an interesting time ahead.