Should you downsize?

There can be many reasons to downsize your home, but should you do it?

Should you downsize?

There can be a number of reasons for downsizing your home, with one of the most common being simply to live somewhere more manageable and user friendly.

Depending on the property, a smaller home can mean less upkeep, allowing more quality time for family, friends and leisure activities. It can also mean less ongoing costs for maintenance and utilities, such as house painting, heating and cooling, watering lawns and gardens and, in some cases, council rates. For some, downsizing can also provide surplus funds that can be put toward future lifestyle and wellbeing requirements.

However, while downsizing can bring many benefits, a number of costs and possible pitfalls can be involved.

Financially, the cost can be significant and can include real estate agent fees, moving costs, property inspections, stamp duty (this amount can vary according to the applicable state/territory), costs for preparing the existing home for sale, and conveyancing costs. If applicable, borrowing costs such as loan establishment and service fees, mortgage registration fees and interest also apply. If the new property is in a more desirable area, is of higher quality or requires work to make it suitable, downsizing may not necessarily produce surplus funds and could even prove too costly for the benefits it may bring.

Moving house is also considered one of the more stressful life events and depending on the location and personal requirements it does not necessarily mean a better lifestyle particularly if family and important services and amenities, such as health professionals, shops and transport, are more difficult to access. 

For those receiving Government Income Support (GIS), such as an Age Pension, certain rules apply with regard to the means test that can impact entitlements. GIS recipients who sell their home with the intention of purchasing another have up to 12 months to purchase the new property before the sale proceeds are counted under the Assets Test. However, sale proceeds are assessed along with other financial assets under the Income Test, as those funds could potentially be earning interest until the purchase of the new property occurs. For more information visit.

As with facing any major decision, it is vital to consider the pros and cons according to your future health and lifestyle needs. Sometimes making adjustments to your existing home may be a more viable way of addressing your needs. For those who do not have the financial resources to do so, accessing the equity in your existing home may be possible; however, costs and restrictions apply and, depending on the circumstances, may limit future choices. For some, family members may be in a position to assist or provide a solution.

Whatever you choose, careful planning and robust discussions are vital to ensure that all parties are fully aware of the consequences.

Craig Hall has worked in the financial services industry for approximately 25 years, including 11 years of providing independent financial information to consumers.

Please note that the information in this article does not constitute or imply financial advice. It is recommended that you seek professional financial advice and/or seek clarification from any relevant government department or financial services provider before making financial decisions.


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    22nd May 2015
    It's a huge decision, fairly high costs are involved in selling and buying, ie real estate commission about $10k and in NSW stamp duty on a $480k house is about $18k. Then there are the other costs, removalists and the challenge of finding a better house (better the devil you know...)
    Myself, I have no intention of ever moving am very happy in my house.
    23rd May 2015
    I agree CindyLou. Better the devil you know

    22nd May 2015
    I believe a few important issues probably concerning a large number of people have been overlooked. Lesser privacy in a smaller domain may be an issue for those who value it. Storage for all of live's precious material things could be seriously reduced with a smaller residence. Lastly, room for any guests staying for at least an overnight visit may be non-existent or embarrassing uncomfortable to the host of the smaller abode. Granted, these issues are, for the most part, only subjectively negative in nature, but anything negative in life, and particularly in ones' later years should be avoided, or lessened, as much as possible as this is no "dress rehearsal".
    22nd May 2015
    If you are a pensioner and the proposed new Assets Tests is implemented forget about downsizing if it is to release some capital for your retirement as the government will take $78 a year from your Aged Pension for each $1000 you make on the deal. This is on top of the cost of buying and selling. At the very least wait until your existing assets outside of your home have been largely spent.
    23rd May 2015
    I downsized and have never been happier housewise. The last place was a nightmare
    although the family who bought it are delighted with it. It was sold to us in Feb. (Dry and hot) but come winter, many of the windows were leaking. I can't write here what we think of the seller. I cut my losses moving and downsizing. So happy now. This will be my last stop.

    23rd May 2015
    What may suit you when you are fit and well may not suit you in old age. It is best if you are going to downsize to do it when you are not forced to do so. Advice I have received from someone who was forced to downsize...caused them great stress as they left it too late and should have done sooner.
    23rd May 2015
    Just planning a new house with future considerations in mind.No steps, everything dead level,no steps, 1000 mm wide doors and bathroom facilities wheelchair friendly. All surfaces low maintenance no hassles in the foreseeable future. I had the block for a number of years and it is only 5 km up the road.And I shift some assets into the new build as well.All around a win win situation.
    25th May 2015
    We have friends who recently retired, took expert financial advise, including FIS from Centrelink, downsized and put surplus money into an allocated pension, and now find that their retirement plans have been smashed by Hockey's new part pension betrayal. How many people know that Hockey himself still claims the $288 a night travel allowance for every night Parliament sits, but only goes just around the corner and stays in a $1.5m mansion in his wife's name. Its lets hit the pensioners but I can gouge every cent I can from the taxpayers.
    3rd Sep 2015
    I built my home 20 years ago fortunately I knew I had rheumatoid and built it on level ground single story 900mm wide doorways inside and out. These 900 allow an ambulance trolley into every room. Didn't ever think would be in a wheelchair permanently but a surgeon got my foot operation wrong and put me there. Now I need a bathroom with recessed basin $4,000 with no cabinet under a new shower with bath taken away and non slip flooring $15,000. Can get some govt. funding but I fall $5,000 short.

    I wanted to sell off 320 sq.m of the backyard for someone to build a unit. The $120,000 to 150,000 I would get would pay for reno an electric wheelchair and some maintenance on existing house, bit of cash as nest egg.

    To my horror the council East of Melbourne just bought in a new Amendment C131. So no more sell offs of backyards on 720 sq.m blocks - one must have a block of 750sq to sell backyard. Reasoning is units need more open space. One unit single story behind an existing house is hardly noticeable. Many do not want/need more space in fact need less. Can't afford water, plants gardeners lawn mowing not physically able to do gardening.

    Now my home has lost the value of the land at the back ($120,000 to 150,000) if I decided to sell. Councils NOT catering to Ageing populations demand/need in downsizing. My area has around 35% over 60's and this is escalating.

    Council tell me we cannot contest C131 or get exempted in any way. I am going to ring Victorian Building authority to see if so and also ask if I got a Private Surveyor to do unit at back do they also have to comply to a C131 ?

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