The Impact of Intergenerational Wealth Transfer on the Property Market - July 2024

By Guest Blogger, Mark McCrindle

Director & Principal McCrindle Research

With many baby boomers nearing retirement and older generations dropping off the perch, there is a huge amount of property wealth that will be transferred to the younger generations over the next three decades.

How will this impact the property market for those families that have not been traditional property owners?

Older Baby Boomers aged 66-75 currently hold 26% of Australia’s national wealth, while younger Boomers (aged 56-65) hold 23%. In total, the Baby Boomer generation holds half of Australia’s national wealth (49%) inclusive of properties and other means of wealth.

Baby Boomers, the generation following the Builders who laid the foundations of modern society, were born during a significant period in Australia's development. They witnessed firsthand the results of the Builders' efforts and benefited from numerous opportunities to purchase property and build wealth. As the first generation after the Builders, Baby Boomers had access to multiple properties, learning from the foundational work of their predecessors. Born into a prosperous era following World War II, they played a crucial role in shaping "The Great Australian Dream": owning a free-standing home with a backyard. This generation prioritised property acquisition in their early income-earning years, benefiting from ample choices and favorable income-to-property price ratios.

As the cost of living and property prices continue to soar, entering the property market has never been more challenging. Young generations, Gen Z and Gen Y, who are either beginning or well into their full-time earning years, face multiple barriers to acquiring a traditional free-standing home. As a result, these generations have had to adjust their goals and ambitions, opting for other forms of property acquisition such as apartments or townhouses, or abandoning the dream of home ownership altogether in favor of alternative wealth generation methods like shares. Consequently, many find themselves either renting or becoming rent-vestors, purchasing property to gain market entry while renting in their desired locations.

As younger generations, such as Gen Alpha (2010-2024) and Gen Beta (2025-2039), grow up and become active adults in society, we anticipate a significant transformation in the property market. Renting may become more socially acceptable, prompting Australians to discover entirely new methods of accumulating wealth, as owning property becomes increasingly difficult to achieve.

Over the next two decades, we anticipate that $6.2 trillion of wealth will be transferred to younger generations. As a result, the Grandparent economy is rising, facilitating wealth and contributing to the financial wellbeing of younger generations. The handling of this wealth transfer will shape the economic landscape for future generations, influencing everything from property markets to investment trends and social mobility.

The wealth divide between property owners and non-owners could exacerbate economic inequality, leading to reduced social cohesion and limited social mobility. Comprehensive policy interventions are needed to address the potential issues associated with increase wealth divide to promote equitable economic opportunities.

As older generations pass on their wealth to their children, the property market is likely to experience several impacts. The influx of inherited wealth could drive up demand for property, leading to higher prices and increased competition among buyers. This might impair the existing affordability issues, making it even more challenging for first-time buyers without inheritance to enter the market. Additionally, the concentration of property ownership within certain families could further entrench wealth disparities, while potentially increasing the number of investment properties for this newly wealthy generation.

In navigating these changes, it is crucial for policymakers and communities to work together to ensure a more equitable and sustainable future for all.

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