One of the many things that doesn’t make sense about Australia’s property market is retirees rattling around in large houses in child-friendly suburbs while young families are squeezing into tiny, urban high-rise flats.


There’s a perception many older Australians opt for a sea or tree change, or shift to a funky inner-city apartment, once work and child-rearing are no longer concerns. Downsizing amongst older Australians1. by the University of New South Wales estimated only 9 per cent of Australians over 50 downsized between 2006 and 2011.


The great generational home swap

The federal government were considering removing barriers to older people downsizing by tweaking the rules around the age-pension asset test and the cap on super contributions but these were abandoned2.


“There are many reasons to consider downsizing,” says our RetireInvest financial adviser. “It can be a way to free up some money to fund bucket-list dreams, or to help your children with a deposit for their own home. I also have clients who think about it from a practical perspective and don’t want to maintain a large home or climb up and down stairs as they get older.”


Potential downsides of downsizing

Our financial advisers have seen downsizing go wrong for clients.


“If you just move to a single-storey house in the same area, or sell a four-bedroom suburban house to buy a two-bedroom flat in the city, you probably won’t end up with much money,” they warn.


“You can get around that by buying in regional Australia, or, as is increasingly occurring, somewhere overseas. However, that can end up being a false economy if you then travelling back to Australia to visit family or for medical appointments.”


While this may change, there are significant consequences to converting housing wealth to cash wealth. For example, let’s assume a couple sell their home and place $200,000 in their bank account. They would then likely see their pension slashed by around $15,000 a year because the age pension asset test excludes your home but not your other assets2.


Elayne’s downsizing experience

In 1987, Elayne, a recently divorced mother of four, bought a two-bedroom terrace house in the inner city of Sydney for $59,000. This was pre-gentrification, when it was considered Sydney’s second-worst suburb.


In 2012 she sold it for $750,000. She then rented for five months while looking for an apartment she could would retire in.


“I had a checklist,” she explains. “I wanted to stay in metropolitan Sydney, be close to transport and be in a single-storey apartment with lifts and a garage. After a lot of time and effort, I found a one-bedder that met my criteria. After buying it and paying all the moving costs I only ended up $15,000 ahead. I no longer have a spare bedroom for the kids to stay in when they visit and I miss my old neighbours. I’m very happy but just not financially better off.”


Where do you see yourself in 15 years?

Some clients don’t want to move, but they need to either for money reasons or because they can’t maintain their property.


One option to consider is releasing equity by taking out a reverse mortgage rather than selling or lease the existing home and rent where you want to buy to give it a go first. You can also consider long term holiday rentals of your existing property while you have a few weeks by the coast or country. This reduces the risk that the seaside town that seemed so delightful during a weekend stay might not seem so attractive once you’ve lived there for six months.


These options have financial implications so it is recommended you seek professional financial advice before taking the plunge, and maintain a long-term perspective.


“Sometimes retirees will move to be near one of their children,” says our adviser, “but what happens if the child then moves elsewhere? The other common issue is that a couple moves, then one of them passes away, leaving the surviving spouse in place where they don’t have a support network.”


Moving house is a major undertaking so work out where you want to live for the next decade or two then talk to a financial adviser about making that a reality.


Want to know more?

It’s always a good idea to review your financial situation before making a big decision such as selling your current home or taking on that sea or tree change. Get in touch your professional financial adviser to discuss whether selling up or staying put will meet your lifestyle and financial goals. If you do not have a trusted adviser, please contact our office today to speak with one of the team.


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  1. https://www.ahuri.edu.au/__data/assets/pdf_file/0012/2181/AHURI_Final_Report_No214_Downsizing-amongst-older-Australians.pdf
  2. https://www.humanservices.gov.au/corporate/budget/budget-2013-14/budget-measures/older-australians/supporting-senior-australians-housing-help-seniors-pilot
  3. https://www.humanservices.gov.au/customer/services/centrelink/age-pension
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