Property inheritance usually is a heavy topic for most of us. It involves the loss of our loved ones and a series of tedious processes. From the perspective of society, it also has complicated economic impacts as housing wealth has become the most important wealth for most of the family in Australia. According to Productivity Commission, the number and value of inheritances have increased in the past two decades in Australia. The booming housing prices and shrinking birth rate could be possible reasons for that. The older generation who own properties are getting wealthier due to the record high housing prices. However, after they pass away, they have fewer children or families to inherit their wealth because of the record low birth rate. In this case, the increasing size of housing wealth and the decreasing number of beneficiaries result in a higher equilibrium in terms of property inheritances. Many people may believe that property inheritances will increase inequality since it appears that wealthy people will inherit more while the poor will inherit less from their families. However, this is not the whole picture. According to Productivity Commission, property inheritances will increase absolute inequality but decrease relative inequality. It sounds complicated but we can illustrate by taking an example. Let’s say John is in his 80s. He is very wealthy and owns a house worth $1,200,000. His only daughter Rachel has $500,000 possessions. Tom is also in his 80s. He is quite poor and only has a unit worth $300,000. His only son David has $100,000 possessions. At this stage, the wealth gap between Rachel and David is $200,000. Suppose that there is no inheritance tax or any deduction. If John passes away, Rachel will inherit the $1,200,000 house. Her total wealth will be $1,700,000, 3.4 times as previous. If Tom passes away, David will inherit the $300,000 unit. His total wealth will be $400,000, 4 times as previous. Now, the wealth gap increases to $1,400,000, which shows greater absolute inequality. However, the percentage of wealth increase for Rachel is smaller than the percentage of wealth increase for David, which indicates reduced relative inequality. This means that the wealth gap between the wealthy and the poor people will widen but the wealth of the poor will actually increase at a faster rate due to their smaller initial wealth base. After inheriting properties, people may either consume or invest them. According to Productivity Commission, Australians are usually net investors of their inheritances. This means that the amount they inherited will increase their wealth by more than that amount in the future. This is typically the case for property inheritances due to the booming housing market. For example, if the price of Rachel’s inherited house will rise to $2,300,000 three years later, her total wealth will be $2,300,000 at that time, which is more than now. This indicates that property inheritances have positive impacts on household wealth accumulation and inherited property is also a type of investment. Property inheritance is not just about transferring the ownership of properties. It affects the issues of inequality and wealth accumulation between generations. Professional investment plans are needed when beneficiaries want to make good use of the inherited properties.

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