Australia’s empty nesters stay put despite growing downsizing pressures

Amid Australia’s housing crisis, a curious trend has emerged among the Baby Boomer generation. Despite the growing pressure to downsize, many older Australians, particularly those with substantial wealth, are holding fast to their family homes. But why are these empty nesters so resistant to the idea of moving to smaller abodes? 

For many, a family home is not just a building; it’s a treasure trove of memories, a familiar comfort in the golden years. However, the reluctance to downsize among wealthier Australians also stems from practical considerations, such as the limited supply of suitable smaller homes, the costs associated with moving, and the potential impact on Age Pension eligibility.

The Retirement Living Council (RLC) has been vocal about the need for policy reform. They argue that the current pension assets cap and Commonwealth Rent Assistance (CRA) eligibility criteria are outdated and fail to reflect the reality of modern-day house prices and living costs. Daniel Gannon, RLC’s executive director, has called the situation ‘absurd’, pointing out that the pension assets cap has not kept pace with the staggering increase in house prices, which have risen close to 600 per cent over 30 years, while the cap has only seen a less than 180 per cent increase for a single person.

This discrepancy has created a paradox where ‘asset-rich, cash-poor’ older Australians are discouraged from ‘rightsizing’ due to fears of jeopardising their pension. The current pension assets cap is $314,000, and as Services Australia spokesperson Hank Jongen explains, selling a home for $1 million with the intention of spending $700,000 on a new place leaves a surplus of $300,000, which is immediately counted under the asset test and could affect pension payments.

The RLC believes that addressing these policies could not only encourage downsizing but also unlock retirement village housing for 94,000 seniors and free up over 59,000 homes for younger families. This could alleviate pressure on public housing, hospitals, and aged care facilities and improve the quality of life for older Australians through age-appropriate living options.

Despite these potential benefits, Australian Seniors has found that 69 per cent of empty nesters are choosing to stay put, with those earning over $200,000 a year being the least likely to move. Only 19 per cent of Baby Boomers have downsized after their children left home, and a mere 13 per cent are considering it, with South Australia showing the highest percentage of Baby Boomers staying in their family homes at 79 per cent..

The reluctance to downsize isn’t just about the financial implications. There’s also the emotional and physical toll of moving. Decluttering a lifetime’s worth of possessions can be daunting, and finding a suitable new home is challenging in the current market, where demand far outstrips supply. Additionally, the costs associated with moving, such as stamp duty, can be significant deterrents.

Yet, there are financial strategies that can make downsizing more appealing. For instance, downsizers can contribute up to $300,000 into their superannuation when they sell their home, providing a substantial boost to their retirement funds.

Moreover, the dynamics of family life are changing. Demographer Liz Allen notes that adult children are increasingly moving back in with their parents, often with their own children in tow. This trend could be curtailed if more Baby Boomers opted for smaller homes, but it also highlights the need for flexible living arrangements that can accommodate changing family structures.

To encourage downsizing, ING Australia’s chief executive Melanie Evans has suggested that state governments could reduce stamp duty for downsizers, a sentiment echoed by Nationals leader David Littleproud. While tax concessions for downsizers have been supported in New South Wales, broader policy changes have yet to be implemented.

As the May 3 federal election approaches, housing policies are at the forefront of political debate. However, neither major party has directly addressed the unique challenges faced by Baby Boomers looking to downsize. It’s clear that a more nuanced approach is needed, one that considers the financial, emotional, and logistical factors influencing the decisions of older Australians.

Have you ever thought about downsizing your home? For many, it’s more than just a financial decision—it’s an emotional one, too. We understand that choosing between the familiar comfort of home and the potential financial benefits of moving isn’t easy. If you’ve considered it, what’s influencing your decision? 

On the flip side, what challenges do you see in making that change? We’d love to hear your perspective. Your insights could help others make thoughtful, empowered choices in their own journey.

Also read: Age Pension eligibility expands as new thresholds take effect