Older Australians set to downsize in droves following budget changes

author-avatar By on May 31, 2021
Older Australians set to downsize in droves following budget changes

The number of older Australians wanting to sell their homes in the next few years has increased, new data shows.

According to data analysed by Digital Finance Analytics (DFA), 1.62 million households are looking to sell down their current property within the next five years, an increase of about one-third from 1.2 million a year ago. 

DFA's rolling survey of more than 50,000 households found 69% of these prospective downsizers are between the ages of 60 and 70; 17.5% are over 70, and 11.6% are 50-60. 

The remaining 1.9% are below 50. 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner-occupiers. 

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 28, 2021. View disclaimer.

DFA's data shows just over 70% of these properties to be sold are houses with either three or four bedrooms, while less than 20% are two or three bedroom units. 

More than half (54.8%) of them are valued below $1 million, but almost half are valued at a million or more. 

Nationally, 71% of those selling are seeking to buy a property below $1 million in value, which is close to the national median value

"Thus, we expect to see a significant number of larger properties coming to market ahead," DFA principal Martin North told Savings.com.au. 

"These statistics are going to have a considerable impact on the state of the market – especially at the upper end of the market."

Where are homeowners downsizing? 

Areas in each of the biggest states - New South Wales, Victoria, Queensland, South Australia, and Western Australia - are among the major downsizing hotspots, with areas around Melbourne, "strongly represented": 

Region

Number looking to sell (1-5 years)

Melbourne - South East

     57,670

Melbourne - West

     52,030

Melbourne - Outer East

     45,310

Perth - North West

     43,230

Newcastle and Lake Macquarie

     42,250

Melbourne - North East

     39,550

Melbourne - North West

     37,340

Gold Coast

     35,120

Sydney - South West

     33,460

Adelaide - North

     32,920

Perth - South West

     32,630

Wide Bay

     31,240

Sydney - Outer West and Blue Mountains

     30,910

Mornington Peninsula

     30,430

Sydney - Inner South West

     28,540

Adelaide - South

     28,450

Sydney - Parramatta

     27,730

Latrobe - Gippsland

     25,880

Source: Digital Finance Analytics (DFA)

See also: Property listings flood the market in 2021

Why are they downsizing? 

The value of these properties being sold is immense, expected to reach $1.6 trillion dollars, which is up from $1 trillion in 2018. 

The total wealth extracted from the market will be around $300 billion, and accessing this wealth is one major reason why. 

“These generations understand the amount of equity they are sitting on in their home,” Mr North told The Australian Financial Review. 

“They feel prices have reached a sweet spot – that prices are peaking.”

See also: House price boom eases - is the market losing steam?

Other reasons for downsizing could be to ensure a more comfortable retirement, move to a regional area, to move to a property requiring less maintenance, and more. 

Another key driver in this surge among would-be downsizers is the recent changes made in the 2021/22 Federal Budget. 

In May's Budget, the government announced it would be changing the rules around contributing downsizing savings into superannuation

Specifically, it is allowing over-60s to deposit up to $300,000 ($600,000 for couples) from the sale of their home into superannuation if they downsize, down from the previous limit of over-65s. 

So from 2022, a larger chunk of that 69% of downsizers aged 60-70 will be able to use this scheme, providing more funds to ensure a comfortable retirement. 

"The measure will allow more older Australians to consider downsizing to a home that better suits their needs, thereby freeing up the stock of larger homes for younger families," the government said in its budget papers. 

Take up of this scheme is low however, with only around 22,000 using it in the three years since it was introduced. 

However, CoreLogic head of research Eliza Owen said the downsizing age reduction "is particularly important in the current climate".

"The measure may free up more established housing by incentivising home sales sooner than at age 65," Ms Owen said.

"Housing demand remains high against a low supply of available properties; total listings volumes remain -23.4% below the five year average level.

"However, the measure will not come into effect until July 2022.

"This means motivated downsizers aged 60 to 64 may wait for the scheme to come into effect before selling, and any impact of increased listings as a result would only impact the housing market then."

Downsizers in Tasmania and the ACT can also earn stamp duty discounts or concessions.


Photo by Jean Carlo Emer on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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