Downsizing means moving from a bigger space to a smaller space. The reasons can be countless depending on the situation. But generally, it is believed that people downsize either because they want to get rid of the extra baggage or they are looking forward to staying at a serene place, or even when children start to live away and you find your home space big enough for two. These are just some of the common reasons people prefer downsizing. However, whatever the reason may be, the decision of buying or selling a home remains crucial.
Typically, downsizing involves the sale of your current house and purchase of a new one.
Types of Downsizing
- Physical Downsizing
- Financial Downsizing
Physical downsizing is when you sell your current home and move to a smaller one.
‘Smaller’ can be the one with fewer bedrooms, or it could also be a smaller block of land with less yard space and garden.
For instance, physical downsizing can also be considered in a case in which a married couple sells their family home and moves to an apartment after their children decide to move out of the home and they no longer need space.
Financial Downsizing
On the other hand, financial downsizing may involve selling your current home and buying a cheaper one. Cheaper house does not necessarily mean smaller house. Let’s understand this with an example, retirees might choose to sell their medium-sized urban home and move to a regional area with a peaceful environment.
It is quite possible that the house turns out to be a larger one than the previous house.
Research on downsizing from the Australian Housing and Urban Research Institute (AHURI) found that the financial downsizing isn’t common among people. It is only about 20% of homeowners aged 55-64 in 2001 had moved to a dwelling of lesser value by 2016.
Why Downsize?
As per the downsizing.com.au, near about one in four Australians over the age of 55 are either downsizing or planning to do so in their near future.
By this, we can comprehend that downsizing is done to move to a place that is more appropriate for the owner of the house based on the circumstances.
Even though, downsizing includes reduction in the dwelling size, to many older Australians it points to a housing aspiration where the internal and outdoor spaces are manageable, and also represents a financial benefit.
If we talk about Australian government, they might typically see downsizing, or rightsizing, as a way to use housing stock more efficiently like with downsizers reducing the number of bedrooms in their dwelling and freeing up larger dwellings. Downsizing a home has a lot of obvious benefits.
Pros of Downsizing
- You save hundreds and thousands of dollars. You can use that saving amount to pay off a mortgage, investing, funding your retirement, or anything that you want.
- There are government incentives for downsizing a house discussed below. Just keep reading.
- You get to move into the home of your choice, like the one that is easier to maintain.
- You can move to a better location maybe a beachside, urban convenience, or a relaxed rural setting, anything that you may have wanted for yourself. Well, as per a survey by downsizing.com.au, the above are some of the popular options.
- Moving to a smaller place means you can have cheaper insurance and utility bills. Also, lower council rates and mortgage repayments.
- By this move, you get to help the younger buyers, potentially family members in buying their first home may be.
Now, let us get into some statistics and understand how many people actually downsize in Australia.
Going by the savings.com.au data, the downsizer superannuation measure is not that popular. Only about 22,000 people have used it so far. Average downsizer contribution of the 4,246 people who have had the access to the scheme in the first year was $235,000.
As per the data from downsizing.com.au as well as AHURI, about 20-25% of homeowners over 55 years of age have downsized or plan to downsize their homes.
Downsizing a home has number of benefits as discussed above. The most important and the primary benefit is that the downsizers get the ability to free up capital for retirement and also you get a great choice to live at a place you might have desired for long.
If we go by the data gathered and analyzed by Digital Finance Analytics (DFA), about 1.62 million households are looking to sell down their current property in the next five years. It means about 33% increase from a year ago with more than 85% of them being 60 years old or more.
Housing Options for Downsizing
Let us first burst a common myth and that for downsizing, people move from a family home into a retirement village. This is not a lie; many people might opt for this choice but the fact is that it is not the only limit for downsizing.
There is a galaxy of downsizer-friendly housing options that suits the requirement and budget of a wide range of age groups and their preferences.
Apart from village, downsizing may also involve moving into duplexes, villas, and apartment complexes (designed specifically for Australians over the age of 50).
Not just this, it could also involve moving into specific downsizing communities, seniors’ rental villages, freehold over 55s housing, and even retirement villages.
Beside the above, low-cost downsizing options also include granny flats and tiny homes.
How to Plan for Downsizing?
The idea of downsizing is not bad. It is a great move and congratulate yourself for that. Selling your current home and buying a new is a big move. Your family and you are likely to have financial and sentimental bonds.
Take it into the account and discuss the proposed downsizing decision with your children and get the perspective so that everyone agrees and is on the same page.
At the same time, it is important for you to seek a wise advice. For that, you can contact the local real estate agent like in Hampton Park, Pakenham, or nearby suburbs.
You can call and seek guidance from the best real estate agent Manny Singh serving in Hampton Park, Narre Warren, and the nearby areas.
Having a real estate agent by your side is great but at the same time, you must also get legal and financial advice to support your decision strongly.
As a home buyer, you might also need to consider varying land title and contract options, their potential benefits and impacts on the income sources and savings. For all this, it is important for you to seek out legal and financial advice.
You are thinking of downsizing, so you may also want to know about decluttering expert, who can give you advice on reducing possessions.
Finally before leaping onto the final step, create a moving checklist.
This can include getting rid of old food from the freezer, mail redirections, organizing removalists, switching utility companies, and organizing the documents.
A pro-tip is to have a fair idea and a blueprint of everything that you may want for about three months before taking such a big move.
Lifestyle Considerations Before Downsizing
Apart from the financial considerations, there are lifestyle factors too that you must take into account because these decisions also have a potential to affect your decision.
Proximity to Friends and Family
You may not be living nearby friends and family members but now you may want to be in the vicinity of your loved ones. So, this factor must be taken into account while downsizing.
Flexibility
Shifting to a smaller house means less maintenance but at the same time this decision will give you less flexibility in terms of space for guests to stay.
Emotional Attachment
Leaving a home in which you have been living for years may get difficult at times. Emotional ties with the current home along with special memories can be challenging. So, this factor must also be considered before finally downsizing.
There is no compulsion in downsizing a home at a certain age. You can do it as per your needs and circumstances. There is no hard and fast rule to downsize. All you need is some right guidance and that you can get from a local real estate agent only. So, if you are looking forward to downsize anywhere in Hampton Park, Narre Warren, or nearby suburbs, contact just the best real estate agent, Manny Singh.
