There is hope that there will be a change in narrative, as the latest residential research suggests swapping the popular downsizing term with the new catchword, rightsizing.
The word “downsizing” often has a negative connotation attached to it, as if growing older necessarily means you are under pressure to downscale your current home into a smaller property.
However, going from big to small isn’t essentially the right way. Moving into a smaller property may not be the right decision. Rather than downsizing, Australians should be focusing on rightsizing – purchasing property specifically suited to their wants and needs in a home.
What is rightsizing?
Industry, government and advocacy groups are thus increasingly referring to the process as ‘rightsizing’ – defined as moving to a dwelling that meets changing household needs, in a location or community of choice.
We know that most older Australians downsize in response to life events and changes, such as a change in health or relationship status, or children leaving the parental home.
Unfortunately, individuals will never know the exact date and time they should or will be considering rightsizing. Usually, it comes in time when people realise, they either have wasted space which at one point was needed space, or realise the difficulties maintaining a two-storey house when 90% of the time, they are downstairs and only go upstairs to sleep.
This is when rightsizing to a modern one-storey house would be more suitable for a couple that spends 90% of their time downstairs. It doesn’t necessarily mean that this new home would be smaller. No instead it would still feature the same number of bedrooms, but it will be more functional and comfortable for them.
The report ‘Effective Downsizing Options for Older Australians‘ authored by the Australian Housing and Urban Research Institute (AHURI) shows that “downsizing, or ‘rightsizing’ as it is often termed, is an integral part of the current and future housing preferences of older Australians.”
The findings are based on analysis of the Australian Housing Aspirations (AHA), of which they surveyed and interviewed 2,422 older (aged 55+) respondents to the AHA survey, 26% had downsized their property, and a further 29% had considered downsizing their properties.
The most prevalent primary reasons for downsizing reported by survey respondents were; lifestyle (27%) and financial (27%) reasons; followed by the garden or property requiring too much maintenance (18%); and being ‘forced’ to move (15%).
Rightsizing isn’t always a lifestyle choice or finding a property that suits a person’s needs but could also be a smart financial choice. No matter the reason, discussing rightsizing with a partner or family member may just help decide what would be the best decision. There are some pros and cons to downsizing.
With a larger home there comes built-in expenses that don’t get any cheaper in time. From regular maintenance to the cost of cooling or heating a larger home, property owners know that significant assets can come with costs of its own.
Benefits to rightsizing
There are many benefits of rightsizing, if the current mortgage payment is large due to a bigger home, opting for a smaller home may pay off debts more quickly. People with significant equity in a house may find that they make money on the sale of their home and may be able to use that profit to reinvest in a rightsized home.
Beyond just paying off debt, smaller space living could help accumulate wealth quicker since there are smaller bills and updating to a more modern home means maintenance is low too.
The AHA survey declares that a large proportion of older Australians who had downsized reported the benefits of their move which included reduced time maintaining their property (55%) and reduced maintenance costs (48%). Many also reported reduced housing costs (42%), a better location (40%), and feeling safer and more secure (36%).
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Disadvantages to rightsizing
There are also some downsides to rightsizing, it’s best to be prepared and well researched so the new property is the right property. Sometimes, individuals believe they rightsize to the correct new property, but they realise it isn’t what suits their needs.
Barriers to downsizing identified in the AHA survey included satisfaction with current dwelling/location (33%) and timing issues (23%). Economic factors were much less important considerations for households who had thought about downsizing.
These barriers occurred to people when they considered rightsizing, but sometimes the biggest obstacle is that people are too comfortable to act on it and they would rather stay where they are.
The last census in 2016 obtained by the AHURI report shows that the number of Australians over the age of 55 increased by almost 3 million in the past 10 years between 2006-2016. It is shown that regional areas often have the largest proportions of older Australians and have high levels of socio-economic disadvantage.
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Measures to help older Australians purchase a new property
Due to the ageing population in Australia, there are some organisations to assist rightsizing to a new property. The Federal Government also assist elderly individuals with these steps, for example, eligible pensioners will receive a one-off cash handout of up to $125 – before the end of this financial year – to help them pay power bills.
The 2019-20 Australian Budget includes some modest measures to help seniors, in a move which will cost the government $284.4m, the Energy Assistance Payment will provide $75 for singles and $62.50 for each member of a couple.
As the age bracket for the pension eligibility age is set to increase from 65 to 67 by 2023, the government has implemented a step where Australians in this age group, will be able to make voluntary superannuation contributions without meeting the government’s work test.
According to a media release by Treasurer Josh Frydenberg, the change “means that Australians aged 65 or 66 years who don’t meet the work test, because they may only work one day a week or volunteer, will now be able to make voluntary contributions to their superannuation.”
The superannuation option is particularly attractive to self-funded retirees, as it can provide tax-exempt income or enable funds to be held in the accumulation phase of super, with the earnings taxed at a maximum 15%.
Words by Ece Demir
- Rightsizing the right way www.nationalseniors.com.au/news/latest/rightsizing-the-right-way
- Should you rightsize your family home? www.blog.howardhanna.com/posts/should-you-right-size-your-family-home/
- Forget downsizing – it’s time to rightsize your home www.propertybuyer.com.au/blog/richs-blog/forget-downsizing-its-time-to-rightsize-your-home
- Half of over-55s are open to downsizing – if they can find homes that suit them www.abc.net.au/news/2020-02-12/older-australians-downsizing-over-55-right-housing-stock-needed/11954726
- Budget 2019 – 2020 Overview https://budget.gov.au/2019-20/content/overview.htm
- Budget 19-20: what’s in it for seniors? www.downsizing.com.au/news/512/Budget-19-20-whats-in-it-for-seniors
- Super Boost: more flexibilty for retirement www.ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/super-boost-more-flexibility-for-retirement
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