In a changing marketplace resilient Australians are quick to change and adapt to get by. A development this year has been an increase in the number of people looking to downsize their homes. The Henry Wong Team® has helped many people downsize over the years, so this is an interesting statistic to us. Let’s look at what downsizing is and why its becoming more popular this year.
What is Downsizing?
Downsizing is the act of moving out of one’s residence to a smaller property. People tend to do this for many reasons, and often you hear it in reference to ‘empty nesters’. These are older couples whose children have left home after finishing school or university. They suddenly find themselves living in a property that’s too big for their needs, so they sell and move to a smaller property.
There are other reasons that people move to a smaller property. Perhaps the yard has become unmanageable for them, they want a lock and leave home so they can travel more, or for some reason they’re no longer able to navigate the stairs in a double story house.
But lately in Australia, people have started downsizing for a different reason.
The Finder Survey on Downsizing
A survey by Finder clarifies that more Australians are looking to downsize their home this year than previously. For many, according to the report, its financially motivated. In fact, around 13% of those surveyed are looking to move to a smaller property in the next year for financial reasons.
5% of those surveyed are looking at downsizing in order to unlock equity. Reasons for this vary, but with the equity they can fund a smaller property and maybe give themselves a bit of a buffer to shield them from rising inflation rates.
8% of those surveyed are downsizing because they want to save money. This is directly related to the rising living costs in Australia. Global logistics issues and worldwide rising energy costs have caused high inflation rates, which is basically an increase in the price of everything around us. As a result, people look to cut costs, and moving to a smaller home helps to do this.
Physical Downsizing: Why the Government is Incentivising It
As well as financial downsizing, people move because they physically don’t require as much space anymore. These are the empty nesters we mentioned above. A lot of them are looking at retirement and moving into aged care or a retirement village.
The number of Australian households thinking about downsizing this year for physical reasons is around 200,000, which is a marked increase on last year. Why is this happening? Why are more people ‘right-sizing’ their homes or moving to aged care facilities?
Well, the government is incentivising it.
As of January 1st, 2023, the eligibility age of people to make downsizer contributions into their superannuation was lowered to 55 years old. What this means is that if a couple over 55 years old sells their home, they can contribute $600,000 of the sale towards their superannuation. A single can contribute $300,000 from the sale.
As well as this, the latest budget includes “a doubling of the pension assets test exemption for home sale proceeds, and a two-percentage-point reduction in the deeming rate on home sale proceeds used to buy new homes”.
Why is the government offering these incentives to downsizers? For a start it strengthens the superannuation scheme and helps people move into retirement more securely. But another benefit is that it frees up housing stock, bringing larger properties onto the market for families and individuals to look at purchasing. After recent times when housing stock has been short, this is seen as a part of the solution.
Get in Touch with the Downsizing Experts
The Henry Wong Team® have been helping people downsize their properties for many years. We know what a big step it is for anyone to take, and we’d love to be there to support you as you take it. So, if you have any questions about downsizing, the right time to do it and what you should be looking for, please get in touch. Henry would love to chat.