A parliamentary inquiry has revealed the brutal reality of home ownership rates for divorced women.
According to the Grattan Institute, only 34 per cent of women who separated managed to own a home within five years and only 44 per cent within 10 years.
Those statistics compared with 42 per cent and 55 per cent for men.
Divorced women were also three times more likely to rent at age 65 than married women, the Victorian inquiry heard.
Of course, more and more research has been showing the inferior financial outcomes for women throughout their working lives and into retirement, which is one of the reasons why I co-authored The Female Investor – Creating Wealth, Security & Freedom Through Property.
However, this new dataset is another stark statistic that highlights the fact the women who divorce often lose their ability to ever own a home again.
Why does the divorce tax affect women more?
According to the Grattan Institute, one of the reasons why women are paying an additional “divorce tax” is that people generally divorce when they are more mature. For women, who may be about 45 or 50 by this stage, this means that they only have about 15 to 20 years left in the workforce, which will make it very difficult to buy a home and have any hope of paying it off before they retire. And that’s assuming they can even get a loan being a single older lady! Don’t get me started on that one.
Another major impediment to buying their own home after divorce is the payment of stamp duty, which the inquiry heard was potentially another “whack” of tens of thousands of dollars that they would otherwise never have had to paid if they had stayed married.
So, what happens is that nearly two-thirds of women who are divorced will not be able to buy a home within the first five years and only about 56 per cent will achieve that goal within a decade.
Of course, for every year that someone is unable to re-enter the property market, it means potentially another year of property price rises and the double whammy of a missed year of capital growth accumulation.
No wonder that the financial outcomes for women are so poor compared to men if they simply won’t have the means to purchase their own home at the end of their marriages?
How can the divorce tax problems be rectified?
The inquiry head that the Victorian property-related taxes represented more than 50 per cent of the state’s taxation revenue with annual property-related stamp duty receipts having increased by more than $6 billion, or more than 140 per cent, since 2014.
This is a similar situation in most other parts of the countries – notwithstanding the fact that ACT and NSW have started to modify their stamp duty regimes.
It’s clear, though, that stamp duty continues to negatively impact housing affordability and is preventing women – single, married, or widowed – from purchasing a home or an investment property.
Now I’m not holding out much hope that stamp duty will be axed anytime soon because governments have such an over-reliance on it to fill their coffers, however, more could be done to help those people who simply don’t have the funds to pay for it, but who are able to service mortgage repayments.
This latest research reinforces the reasons why women – of all ages – really must forge their own financial paths and preferably purchase property independently when they are younger.
That way, if they ever got married and divorced, their financial future is not decimated because their only asset was the one that they owned with their former spouse.