Home is where the heart is, and for more than 40 per cent of older Australians, it determines where they live in retirement.
National Seniors’ new research report reveals that while many Australians consider downsizing to a smaller house when they retire, a substantial proportion of older homeowners rule it out because they don’t want to leave their house, neighbourhood and community.
According to the report, 42.1 percent of retirees said they wanted to stay where they had memories of the kids growing up, and the space for hobbies and their children and grandchildren to come and stay.
For those keen to downsize, two key financial disincentives affected their decision: transaction costs such as stamp duty; and the possibility they could lose their Age Pension and associated concessions on expenses such as transport, power, rates and water.
The findings came in the report released earlier this week titled Downsizing: Movers, planners and stayers, and author Dr Karen Rees said Australian retirees fell into one of three categories.
“Our research showed that a third of retirees are movers – they have already downsized – and 25 percent are planners – moving to a smaller home is something they plan to do as they age,” Dr Rees said.
“Their reasons to downsize in retirement usually revolve around not being physically able, or finding it too costly, to maintain the home and yard; the need for a single-level home because using stairs is difficult; and the desire to use the sale proceeds to maintain their lifestyle or to travel. Another key factor in deciding to downsize is the death of a spouse or relationship breakdown.
“But 42.1 percent are stayers, and many say the only way they’d downsize is if they are forced to by financial hardship or the loss of their partner.”
Dr Rees said in the wake of downsizing measures included in the 2017 Federal Budget, the new Nationals Seniors research aimed to discover if the chance to put $300,000 per person ($600,000 for a couple) from the sale proceeds of their home into superannuation would encourage seniors to downsize.
While almost 90 percent of planners were aware of the Budget measure, only 17 percent said they would be encouraged to downsize by the initiative.
However, just under a quarter would be encouraged to downsize if the sale proceeds of their home were exempt from the Age Pension means test.
“So, it appears the government’s Budget initiative is not a strong incentive to downsize, and National Seniors’ ‘Rightsizing’ policy that would enable up to $250,000 of excess sale funds to be quarantined from the Age Pension means test is more on track,” Dr Rees said.
The full report can be read online at nationalseniors.com.au/downsizing.