The Inheritance Tsunami: A Wave of Wealth Transfer
In This Week's How's The Market | Edition 53
The Inheritance Tsunami: A Wave of Wealth Transfer
A Disparity Amongst Markets
Property Investors Threaten To Quit Victoria As Housing Taxes Double
The Inheritance Tsunami: A Wave of Wealth Transfer
In the coming decades, a significant financial shift is set to reshape the landscape of inheritances. As the baby boomer generation enters a new phase of life, the magnitude of wealth to be passed down to future generations is staggering. Brace yourself for the "Inheritance Tsunami" – an unprecedented surge of inheritance that promises to transform the financial landscape.
As the "Inheritance Tsunami" gathers momentum, its far-reaching consequences are poised to reshape various aspects of our economy. Beyond individual fortunes and financial stability, this monumental wealth transfer is expected to send powerful ripples throughout the real estate market.
Recent analyses and forecasts indicate that the amount of inheritance being passed down, primarily from the baby boomer generation, will experience an extraordinary surge over the next few decades. According to estimates, the volume of inheritances is expected to quadruple within the next 30 years. This means that an astounding $3.5 trillion will be passed down over the next decade alone, steadily rising to an annual transfer of $224 billion by the year 2050.
This will have 4 major affects on the property market:
A Surge in Demand: With the projected quadrupling of inheritances over the next three decades, a substantial increase in homebuyer demand is expected. Beneficiaries of inherited wealth may enter the property market with significant purchasing power, fueling intensified competition and driving up property prices. As demand outpaces supply, aspiring homeowners and investors may face heightened challenges in securing properties within their desired price range.
Upscaling Property Aspirations: The infusion of inherited wealth is likely to reshape homebuyers' preferences and aspirations. Individuals benefiting from substantial inheritances may set their sights on higher-end properties, seeking upscale neighborhoods, luxury amenities, and enhanced lifestyle offerings. This shift in demand dynamics may result in elevated prices within these segments of the real estate market.
Regional Disparities: The impact of the Inheritance Tsunami on property prices may not be uniform across all regions. Metropolitan areas and regions with strong economic growth, desirable amenities, and thriving job markets are anticipated to experience more pronounced effects. In contrast, rural or less economically vibrant areas might witness a more modest rise in property prices, driven primarily by local demand factors.
Investment Landscape Evolution: Real estate has long been considered a stable and attractive investment option. As inheritors seek to preserve and grow their newfound wealth, real estate investment may become a preferred avenue for wealth appreciation. This surge in investment activity can potentially exert additional upward pressure on property prices, particularly in sought-after markets and asset classes.
We are already seeing the affects of generational wealth with some buyers making cash offers on multimillion dollar homes. I expect this will continue and the gap between the haves and have-nots will continue to grow.
What The Agents Are Saying
This week, we’re going to give you info straight from the horse's mouth. The general sentiment hasn’t changed a lot this year with lack of supply still being the main issue. See below what the agents are saying:
Geelong
Wade Maindonald - Real Estate Geelong
“What I've seen in Geelong is a market a contraction but not a contraction in a negative sense like the media likes to preach , more of a contraction in a getting back to reality sense.
Geelong saw a huge boom in property prices over the COVID period so it's only natural that following that boom would be a downturn, this is just the natural way of things.
However, well presented 4 bed 2 bath homes are still selling quickly and catching top dollar in the most suburbs.
Even with the rate rises there are still plenty of buyers around, from fhbs to interstate movers and surprisingly more and more cash buyer investors who see the downturn as an opportunity to buy assets with less competition”
Inner Melbourne
Ash Howarth - Marshall White
“In the final auction weekend of Q2 of 2023, once again buyers braved the cold weather to turn up in droves at both auctions and open for inspections on Saturday. Buyers who have missed out previously are even more determined to make a purchase. Melbourne’s property prices have been rising since February due to the lack of property offered for sale with auction clearance rates now at the strongest they have been since October 2021.”
South East Melbourne
Connor Pinnington - Noel Jones
“We are seeing increased competition despite interest rate rises due to the ongoing lack of choice for buyers. A lot of prospective sellers sitting on their hands as they are worried they won’t be able to find something if they sell.”
The Wow Factor!
417 Beach Rd, Beaumaris, Vic 3193
Four stories with ocean views!
Not every property on Beach Rd has uniterupted amazing ocean views and certainly not ever property is 4 stories with an enormous garage.
This property comes with both.
Price tag: $4.3m - $4.73m
In The Media
Property investors threaten to quit Victoria as housing taxes double
This is something we are hearing and seeing a lot on the ground.
On the weekend just gone, I inspected 8 properties in a fringe suburb popular with first home buyers and investors. All 8 properties were investors selling which is something I did not expect.
Many investors I know would prefer to purchase in other states where they can get typically cheaper entry prices and cheaper holding costs.
This new tax will hurt tenants as less supply becomes available.
Final Thoughts
With a huge wave of inheritance coming and soon to hit the market over the next few decades, it makes me believe that house prices will continue to rise on a similar trajectory to the past with the inner city and more prestigous suburbs set to benefit the most as more wealthy people will fight for premium blue chip locations.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
