Pushes to encourage retirees to free up larger homes for younger families still risk opening many up to increased financial security concerns that will create even more economic drag.
Aussie Baby Boomers – those born between 1946 and 1964 – are often at the forefront of Australia’s national conversations around critical housing supply and soaring property prices.
Both government policies and housing market dynamics often push those at retirement age to give up their home in favour of a smaller property, however Homesafe Wealth Solutions findings show the reality can be as economically damaging as it is helpful.
National home prices are at a record high across the country and while a tighter interest rate environment this year is expected to slow growth, it’s expected the market will still be 6-8% more expensive by the end of 2026.
As buyers continue pushing into the market and demand ramps up, retirees are battling against more than just public and government pressure to move on.
Australians aged 55 and over can currently contribute up to $300,000 from the sale of a home directly into their superannuation.
Any financial gains to selling up and sizing down continue to be largely eroded thanks to pricey stamp duty taxes and agent fees.
While concessions have been widely discussed, political complexities have left the idea largely on the backburner in recent years, with the pendulum swinging the other way in the form of the government’s ‘spare bedroom tax’.
Proposed at last year’s Economic Reform Roundtable, the controversial plan suggests that households with more rooms than they actually use should be charged more tax in a move designed to free up housing stock.
Treasurer Jim Chalmers held the Economic Reform Roundtable last August. Picture: Tracey Nearmy/Getty Images
The vast majority (85%) of older households (aged 55+) have two or more spare bedrooms, though realestate.com.au and GemLife research shows many people remain in their family homes because appropriate downsizer housing is not available..
Smaller homes designed with older Australians account for less than half of all new homes built between the 2016 and 2021.
For Boomers balancing costs in retirement, strict Age Pension eligibility rules give more reason to avoid downsizing.
Though family homes are exempt from the asset tests which determine pension allowance, funds from property sales are assessable.
If a couple frees up $300,000 by downsizing, Homesafe estimates show their pension could be reduced by up to $900 each fortnight. Under current taper rates, this translates to $23,400 every year.
“This is a trap many retirees do not see coming,” chief executive Dianne Shepherd said. “Downsizing means losing far more than square metres.
“Many retirees end up worse off. The idea it automatically improves financial security is not always the case.”
Homesafe Wealth Release chief executive Dianne Shepherd. Picture: supplied
Even with financial incentives and suitable housing alternatives, older Aussies just don’t want to move.
The Australian Institute of Health and Welfare said housing is crucial for the physical, psychological and emotional wellbeing of many.
“The family home is not just an asset, it is a source of identity, stability and connection,” Ms Shepherd adds. “Downsizing is not the universal solution.
“Most older Australians want to stay where they are, many cannot afford to move, and the housing market often does not offer what they need.”
This article first appeared Mortgage Choice and has been republished with permission.
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