A major challenge for the real estate market has been persuading empty nesters to sell the family home and downsize.
Stamp duty on the purchase of a new home – a tax that can get into six-figure territory – is the key reason why older Australians are refusing to sell their family homes.
In the last few weeks, leading executives in the real estate industry have been calling on state governments to reduce stamp duty to potentially encourage more family homes onto the market.
One idea has been for stamp duty relief for “last-home buyers”, which would copy the “first-home buyer” scheme that all state governments offer younger Australians.
Age limit might be applied to a last-home buyer program, rewarding those aged 70 and over for making the move to downsize.
Holiday homes are another target. Relief on capital gains tax for selling vacation homes would encourage owners to put their second properties on the market.
One real estate executive was quoted as saying: “These measures would deliver a win-win, giving older Australians the financial confidence to sell while unlocking much-needed housing supply for first-time buyers and upgraders.”
The focus on encouraging owners to sell family homes comes as prices continue to rise.
Industry research Cotality (formerly CoreLogic) says that metropolitan prices are now climbing at 0.8% a month and that the spring selling season is becoming increasingly competitive.
Auction clearance rates have been hovering around 75% and more for almost two months, according to the property portal, Domain.
Rival research house PropTrack has confirmed that national property prices have now recorded eight successive monthly increases. Based on properties featured in its portal, PropTrack estimates the average national value is $827,000.
Industry estimates suggest the market could see a 7%-8% increase in values over the next 12 months, with Sydney and Melbourne driving the price expectations. One agency has even suggested that prices could rise 8%-10% next year.
The CEO of Propertybuyer.com.au, Rich Harvey, has said that while incentives to downsize were plausible, the bigger problem was the lack of suitable stock for older Australians selling their family home.
He told one media outlet: “Older people want to move into low-medium density (housing), something a bit smaller with easier maintenance. There’s not a lot of those available.”
If you are considering downsizing, here are five ideas to think about:
Focus on the benefits – Downsizing is a new beginning and should not be viewed with a sense of loss. See the positive aspects, such as a more manageable living space, reduced maintenance and cleaning, and the financial freedom that may come from selling a larger home.
Create a detailed plan – Downsizing is a process, not a one-day event. Begin by having open and honest discussions about downsizing long before a move is imminent. Create a timeline and break the overall task into smaller, manageable steps.
Involve the family – Family members can provide emotional and physical support, helping with everything from sorting through belongings to moving heavy items. For tasks that are too difficult or emotionally taxing, consider hiring a professional.
Digitise everything – Sentimental items are often the hardest to part with. To ease this, we suggest digitising important documents, photos and home videos. Services are available that can scan photos and convert old tapes into digital files.
Comfort is your priority – Strategically place familiar furniture, photographs and decorations in your new home. A well-organised new space that incorporates cherished items can make the transition easier.