At first glance, it would seem that downsizing is a popular choice amongst older Australians. However recent research (Downsizers and Other Movers – The Housing Options Choices and Dilemmas of Older Australiansi) highlights that only 9% of 50+ year olds moved to a smaller home in the period 2006-2011. We explore some of the issues to consider when reviewing your housing needs.
Of those surveyed for research, ‘Lifestyle preference’ was the number one reason for downsizing, with ‘Retirement’ and ‘Financial gain’ coming in fourth and sixth place respectively. However, with the recent announcements during the Federal Budget, we now see another major reason to downsize. An opportunity has been presented to those aged 65 or more to downsize their home in return for super incentives and tax breaks. "The measure reduces a barrier to downsizing for older people. Encouraging downsizing may enable more effective use of the housing stock by freeing up larger homes for younger, growing families," Treasurer Scott Morrison said.
Another belief explored in the research findings, is that older people are under-utilising family homes, so downsizing would seem like a sensible step. However – when questioned – 91% regarded their (mostly three or more bedroom) dwellings as suitable for the needs of their household. While 86% had one or more ‘spare’ bedrooms, close to 75% of those had temporary residents requiring the use of that bedroom – that being an adult child, grandchild or other relative.
And it seems that after retirement, we could actually need more room, not less. As we spend more time at home, an office or hobby room is a common requirement. For couples, each having their own personal space was considered important. Even if your grown-up children have long flown the nest, many come back for weekend visits, so a spare bedroom can be a necessity.
But what if you feel that downsizing is right for you? A big driver for those that do opt for a smaller home is the inability to maintain the current family house and/or garden. This can also be compounded by the loss of a partner, relationship breakdown or ill health, all of which would make it harder to continue with the up keep of a larger property. 33% of those who downsized said reducing living costs was the main reason for moving.
Downsizing certainly can mean a lesser financial burden for some, but it’s important to take into consideration other costs such as removalists and stamp duty – which 11% of downsizers included as a ‘difficulty’ of the moving process. There may also be implications on the age pension, so it’s important to make sure you are fully informed. Another important factor is that with many Australian suburbs dominated by large family homes, finding a suitable place may mean moving to a different area. It could mean moving further away from friends, family and your support network. Something we tend to rely on more heavily as we get older.
Seeking professional financial advice is something currently only 14% of downsizers do. But it could make a significant difference. Deciding whether to stay put or sell up is complicated. Talk to us today before you make the big decision. Using contemporary financial modelling tools, we can model a range of “what if” scenarios to equip you with the information you need to make the right decision for your circumstances.
Not sure if you should downsize?
If you want to discuss your options and retirement plans one of our advisors to make sure - call us to arrange an appointment on 02 9328 0876.
i Judd, B., Liu, E., Easthope, H. & Bridge, C. 2014, ‘Downsizers and Other Movers: The Housing Options, Choices and Dilemmas of Older Australians’, Three Days of Creativity and Diversity, vol. 35, pp. 129-38.
General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.