Making downsizing easy for Sydney
Many first time homeowners in Sydney are finding it extremely difficult to own a home. There is an undersupply of homes and the few available command astronomical prices. If the housing situation is to change, something drastic has to be done. According to research, more than 500,000 homes have at least two empty bedrooms. Most of these homes are occupied by empty nesters and singles over the age of 50. It looks as though there aren’t enough incentives to make senior Sydneysiders to downsize yet.
People are emotionally attached to their homes
There are several policies designed to encourage senior Australians to downsize. However, the incentives given would not really work at making people downsize and at the same time, the effects on the budget would be dire. On the other hand, several pieces of research show that the majority of senior home owners are emotionally attached not only to their homes, but neighbourhoods as well. This makes it hard to convince them to downsize. Moreover, financial incentives don’t seem to play a big part in persuading seniors on why they should move to smaller less expensive homes. See money benefits for downsizing home.
The financial hurdles
Currently, family homes are excused from the pension assets test. A new home even if it is bought with the proceeds of the previous family home it is likely to be subjected to the test. This alone does not encourage people to downsize.
Any person who buys a new home including a downsizer must pay stamp duty. A senior will certainly not be persuaded to buy a smaller house and add another $30,000 for stamp duty.
A house sold with the intentions of buying another one is considered a business transaction and subject to taxation. On the other hand, the capital gains on your home are not taxed.
In May 2017, the government in its budget announced that downsizing seniors over the age of 65 can now contribute $300,000 per person to their superannuation. This contribution will be exempt from tax. The law will take effect in January 2018. There are, however, many checks and conditions such as having lived in a residence for more than ten years in order to qualify.
Downsizing has little to do with the money
Research shows that over two-thirds of Sydneysiders want to age in a familiar place. This means that they will not sell their property because it is normally hard to find a place to move to in their neighbourhoods.
According to a study conducted by Productivity Commission, around 20% of people over the age of 60 have sold their homes in order to downsize. Loss of a partner, wanting a different styled house or a house becoming too hard to maintain are some of the reasons why people downsize.
Are you thinking about downsizing? Contact Viviann Stuart so we can help you make the right choice for your situation!