‘It will be the death of a spouse or ill health that forces them to downsize’, says research institute.
Government incentives to downsize are not hitting the mark, with older Australians who reach retirement age preferring to stay in the family home unless declining health forces them to leave, new Australian Housing and Urban Research Institute (AHURI) research shows.
The research, Moving, downsizing and housing equity consumption choices of older Australians analysed the housing decisions of Australians aged over 55 to understand who downsizes or moves, and why.
“Our research shows that older, home owning Australians are generally reluctant to downsize or to spend their housing wealth over the course of their retirement,” says lead researcher Associate Professor Stephen Whelan from the University of Sydney.
“When such transitions do occur, they tend to be associated with key life events that are not induced by or associated with policy settings; for example, health shocks that require a move into aged care; retiring from the workforce or the death of a partner.”
Around 65 per cent of homeowners aged between 65 and 74 in 2001 were still living in the same home in 2016. For those aged over 75 years in 2001, more than half remained in their original residence 15 years later. In fact, in 2016, 64 per cent of householders aged over 80 still lived in their primary residence.
Prof. Whelan says that while stamp duty and the exemption of the family home from the Age Pension asset test discourage downsizing, most people only consider the move to a smaller place if they become ill or lose a partner.
“Economic considerations don’t seem to be critical, but nonetheless we’d argue that policy should take them into account and should be set in a way that facilitates downsizing, if and when it’s appropriate,” Dr Whelan told The New Daily.
Prof. Whelan believes that including a portion of the family home in the asset test and replacing stamp duty with a land tax could make downsizing more attractive.
“If you imagine there’s one million old homeowners who potentially could downsize,” he said.
“These types of changes are not going to affect everyone’s behaviour because, for many people, it will be the death of a spouse or ill health that forces them to downsize.”
The research also shows that, to date, Australians currently aged 55 to 64 are about as likely to own their home as their older counterparts at retirement, although they are less likely to own their home outright and they’ll be more likely to have less equity in their home, which could put a strain on their income streams, such as superannuation or the Age Pension.
Prof. Whelan believes that the growing proportion of people likely to retire without owning their home poses a challenge for policy makers, as the pension was not set at a level to cover private market rental payments.
Are you likely to downsize? Which factors would compel you to leave your primary dwelling?
SOURCE: Leon Della Bosca, Publisher, YourLifeChoices