Older Aussies rushing to cash in after Budget change

An increasing number of older Australians say they plan to sell their homes in the next five years.

Data analysed by Digital Finance Analytics (DFA) found 1.62 million households want to sell their property within the next five years, an increase of about one-third from 1.2 million a year ago, reports savings.com.au

The rise in intended downsizers could reflect recent government policies. In 2017, there was concern that not enough Australians were selling their homes once their children moved out because their superannuation balances were not high enough. In 2019, the federal government introduced a downsizer scheme designed to encourage retirees to free up underutilised housing stock or properties with several unused bedrooms.

The scheme allowed people over 65 to sell the family home and make a one-off, $300,000 contribution to their superannuation balance. Couples could contribute $300,000 each.

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The recent Federal Budget reduced the age eligibility to 60.

“As homeowners become older, they are less likely to move house and a reworking of the scheme against a backdrop of strongly rising property prices is expected to encourage wider participation in the program,” said James Kirby of The Australian.

He says the downsizer scheme, aimed at ‘asset rich, income poor’ retirees, has had limited success to date.

“There have been 22,000 applicants, which pales in comparison to related schemes targeting the housing sector, such as the HomeBuilder scheme, which has had 120,000 applicants.

“But the lower age access limit should expand the popularity of the scheme because it aligns the access age of the scheme with the age the majority of Australians can access their super.”

Mr Kirby says the downsizer scheme appeals to two groups: those who have not put enough into super and are restricted in doing so at a later stage in their lives, and wealthier Australians who have already ‘maxed out’ on their super breaching the super ‘cap’ of $1.6 million.

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The Federal Budget also scrapped work test rules for older Australians, meaning they can get super for work regardless of how many hours are worked in a 30-day period.

Emotional attachment to the family home has always been the main block to downsizing.

In 2017, the Grattan Institute concluded that two-thirds of older Australians wished to “age in place”. And people who wanted to move within their area often couldn’t find affordable smaller houses.

But the overheated property market would appear to be convincing older property owners to reconsider and make the change.

CoreLogic head of research Eliza Owen said the downsizing age reduction “is particularly important in the current climate”.

“The measure may free up more established housing by incentivising home sales sooner than at age 65,” Ms Owen said.

“Housing demand remains high against a low supply of available properties; total listings volumes remain -23.4 per cent below the five-year average level.”

Associate Professor Wendy Stone, program leader at Swinburne Research Centre’s housing research program, told domain.com that the main reason people over 55 downsized was financial.

“For homeowners, a key priority is trying to pay off a mortgage before retirement if possible. Given that housing costs have increased since the turn of the century and even just before that, people entering into their retirement years now are doing so on average with a greater degree of mortgage debt than a similar age group had until fairly recently.”

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Assoc. Prof. Stone’s national survey, Australian Housing Aspirations, undertaken with Curtin University, surveyed nearly 2500 people aged 55 years and older and found 60 per cent of respondents had downsized or had thought about it.

“This includes people who are approaching retirement years, people who might have just been retiring, people enjoying their retirement years, and also those aged 75, 80 and over,” she said.

“We found that the rates of downsizing do increase a little bit when people hit 65, but people are definitely thinking about it from 55 years and up.”

Assoc. Prof. Stone says as a result, Australia needs more diverse property options, such as townhouses, larger apartments, secure affordable rentals and smaller houses in areas where older adults want to live.

What do you think about downsizing and the recent changes to encourage more Australians to downsize? Are you now more likely to consider such a move? Have your say in the comments section below.

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Written by Will Brodie



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