Downsizing Your Property — The Pros, The Cons, And The Various Considerations
For many of us there comes a time when the nest is empty, and we begin to consider downsizing the family home.
In my line of work, I’m uniquely positioned to observe many of my clients go through this
milestone and accompany them through downsizing pursuits. As with any big decision in life, it entails pros, cons, and a multitude of choices — it’s undeniably a significant undertaking.
How do you know if your life is ripe for downsizing?
Working with clients who have had a rich variety of life experiences, I see a handful of common themes arise as reasons they choose to swap up the family home for something more compact.
• Often the seed is planted when they find they’re rattling around in a large family home after the kids have left the nest. The imbalance between the space and the number of family members inhabiting the space can be unsettling, which prompts them to explore options for a lifestyle change.
• With the shift in parenting obligations once the kids have left home, often moving closer to things they need or enjoy becomes more of a focus. I frequently see clients choose to trade in the sprawling home in family-focused neighbourhoods to move more inner-city and be closer to their children, favourite restaurants, shops, sporting clubs and healthcare providers.
• Wanting a home they can lock up and leave when they take off for extended holidays in retirement is another popular reason behind the choice to sell the large family home. Although house sitters or AirBnB are both options for keeping your home occupied while away, I find many clients prefer not to take on these additional concerns and maintain an ability to be spontaneous with their travel plans.
• Moving to a property that is low maintenance, and devoid of stairs or other accessibility issues is a longer term consideration I nevertheless see clients making. While ageing is something we typically don’t enjoy thinking about, it’s a reality we must keep in mind. Ageing at home is widely considered to be ideal, and making plans for this is the best insurance policy.
• In this past year I’ve also noticed another reason amongst my clients for downsizing the family home, and that’s the increased retirement investment it can now offer. Since 1 July 2018, those aged 65 or over are permitted to make non-concessional contributions to their super of up to $300,000 from the proceeds of selling their principal property owned for at least 10 years. For couples, that contribution allowance is $300,000 each, and this does not count towards the non-concessional contribution cap or the $1.6 million balance test. In these cases, you do not need to meet the existing maximum age or work test rules. It’s worth discussing these options further with your financial planner to decide if this new allowance suits your financial situation.
Both sides of the downsizing coin:
Evidently it’s not a clear-cut decision to make, and there are both advantages and disadvantages attached to selling the family home in favour of a simpler dwelling. As with anything, it’s a matter of sifting through these pros and cons as they affect your specific life.
Advantages of downsizing:
• Less time spent on maintenance and cleaning. Downsizing to a smaller allotment or apartment will undeniably free up time spent looking after the garden and cut the costs associated with pool maintenance and cleaning. If you no longer use these home facilities, perhaps that money would be better spent elsewhere.
• A simpler and more compact home means cheaper utility bills, rates, and insurance.
• Increased cashflow and not having the demands of a larger home reduces the stress attached to all of the above pressures.
Disadvantages of downsizing:
• Having to downsize furniture and belongings can be an emotional upheaval. For some people, it can be highly rewarding to de-clutter and simplify their life once the task has been tackled.
• Reduced space for guests, visits from kids, or hosting a large party.
• Reduced amount of rooms or garden spaces to enjoy various hobbies.
• The lifestyle change may not be something you seek — some people are resistant to change and enjoy their current home, comforts, and what they know.
Whether to downsize or not is a tough milestone decision in anyone’s journey. It’s important to take your time with the decision and chat it over with friends and family to help you clarify whether it fits with what you want at this stage.
