Research
Amanda Graham

4 ways to ride the downsizing wave

By Amanda Graham

The lack of vendors willing to sell their properties is drying up pipelines across the country. But among this reluctant group is a potential downsizer section that might just become willing to sell – with some useful advice and in the right circumstances. Here’s how.

1. Know the motivations of potential downsizers

It’s important to understand the motivations of people who are considering downsizing. According to the Australian Housing and Urban Research Institute (AHURI) survey, the “dream downsizing home” is:

  • Smaller in size (such as having a more manageable yard) than the current home
  • Easy to access and to move around in, and preferably with only one level
  • A lifestyle improvement, particularly in terms of good entertaining areas
  • Close to shops, health services and public transport
  • Located in an area which is desired by the downsizers, often close to where they currently live
  • Something which delivers financial savings, as a result of discharging a mortgage or collecting capital gain
  • Alongside likeable neighbours

One big tip here – don’t forget the strong motivation of people to be near neighbours you like. If you’ve been living next door to the same neighbours for decades, it’s a scary thought to become a stranger in a new neighbourhood. As such, finding out about friendly neighbours, streets and communities will be warmly welcomed.

2. Know the state-by-state downsizing incentives

Different states have different incentives which could be used by downsizers, primarily through stamp duty rebates or concessions.

While, unfortunately, NSW is not much help in this regard, the Australian Capital Territory, South Australia and Northern Territory all have incentives; it pays to know them.

3. Know the national incentives for downsizing

It’s worth knowing that the Australian government will introduce superannuation-based downsizing incentives next year.

From July 2018, the government will make it easier for over 65s to contribute up to $300,000 from selling the family home into their personal superannuation fund. This $300,000 contribution will be exempt from the existing age and work tests for people aged over 65.

This would mean, for instance, that someone aged over 75, who is currently not allowed to make voluntary superannuation contributions, will now be able to do this when selling the family home.

Similarly, currently if you are aged 65 to 74, you must have worked for at least 40 hours over 30 consecutive days in the financial year to be allowed to make a voluntary contribution. Next year, that rule will also not apply for contributions from the proceeds of the family home.

This incentive is likely to encourage many self-funded retirees to downsize.

4. Know the barriers to downsizing

As much as the above change is great help, it doesn’t overcome two other unfortunate financial barriers to downsizing.

The first of these barriers is if stamp duty that needs to be paid on a new home (subject to the state by state incentives mentioned above). However, it’s worth noting that stamp duty does not apply to many of the “over 50s” lifestyle villages and retirement villages which are attractive to downsizers.

The second is the potential that excess money collected from the sale of the family home could impact on pension access.

Many investors may still receive a huge capital gain from downsizing and may be willing to make the move.

About the downsizing market

Statistics show that over the past two years, the number of listings have fallen across the country despite our surging population and increased housing construction. Across Australia, hundreds of thousands of people are unhappy about the fact they are living in large family homes.

Typically, these people are aged over 50 and are weary of the ongoing maintenance and repairs these homes require. (Like, who really enjoys mowing the lawn?)

At the same time, the homes these over 50s occupy are typically among the most expensive in neighbourhoods, because they have a large land and house size.

In NSW alone, there are estimated to be more than 500,000 homes occupied by an elderly single or couple, with two empty bedrooms. Across Australia, there are estimated to be anywhere from 4 million to 7 million empty bedrooms in homes.

A June 2017 survey by Downsizing and LJ Hooker found that around a third of over 50s were looking to move from the family home to a more suitable and well-located accommodation – in other words downsize.

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About the Blogger

Amanda Graham

Amanda Graham

Amanda Graham is the co-CEO of Downsizing.com.au.

Email:
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Smart Property Investment" ["page_heading"]=> string(34) "Property Investment Expert Opinion" ["menu-meta_description"]=> string(91) "Read the latest insight and opinions from Australia's property investment industry leaders." 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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1190 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
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  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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