Government scheme to encourage downsizing taken up by 15,000 in two years

Just under 15,000 people have taken up a scheme encouraging over-65s to sell their large family homes and downsize over two years, Treasury figures show.

The federal government’s downsizer superannuation scheme, launched in July 2018, encourages allows eligible home owners to contribute a lump sum up to $300,000 to their super from the proceeds of the sale of their property.

As of July this year, 14,712 people had taken up the scheme since its inception, contributing $3.4 billion to superannuation, Treasury numbers show. A Treasury spokesperson said the scheme was open to all applicants who were legally eligible, and Treasury did not set targets for demand-based schemes.

The number is a far cry from the roughly four million Australians aged over 65 in 2018 and 2019, Grattan Institute economist Brendan Coates says.

“If the scheme had been successful, we would have seen larger numbers,” Mr Coates says. “Financial motivation is not the reason people downsize.”

There are more than five million Baby Boomers in Australia, just under three-quarters of them are now aged over 60 and looking towards retirement.

But as they do so, many will stay in their family homes with 83 per cent of people over 60 wanting to age in their own homes, according to the Productivity Commission – choosing location, size and emotional ties over downsizing, right-sizing or retirement communities.

Mr Coates says people tend to move to a smaller home only when they have to for practical reasons, such as a big garden or stairs.

When they do move they often want to stay nearby, where smaller homes are likely to be newer and not that much cheaper – meaning there is little financial benefit unless someone makes a full sea change or tree change.

If the large Baby Boomer cohort continue to live in their family home for longer, it could mean more competition for family-sized homes in desirable suburbs near employment and transport, Mr Coates says.

“Younger people with families are probably competing for fewer properties.”

He says the downsizer superannuation scheme was unlikely to have led extra people to sell up and move somewhere smaller, but rather to have given a tax break to those who were going to do it anyway.

Abolishing stamp duty and including more of the home in the asset test for the aged pension would likely do more to encourage people to downsize, he says.

Ensuring there were enough suitable, smaller homes in the inner and middle neighbourhoods of Australia’s capital cities would also have an impact – allowing the next generation to move into the four-bedder on the 600-square-metre block.

“If there were more housing, it wouldn’t be a problem in the first place,” Mr Coates says.

Demographer Mark McCrindle says another reason older Australians aren’t moving out of the big house is that their kids are not moving out either.

“COVID has added to that trend. Firstly it’s slowed down any transactions and changes,” Mr McCrindle says. “But secondly it’s reduced the proportion that were empty-nesters because many of the children have returned to the family home to save money.”

He says Boomers have also recognised the benefit of extra space due to working from home, having a back-up for their kids or having more space during lockdowns.

“That third or fourth bedroom can be well put to use, as well as the backyard and the green space.”

He says while much of the country is free of lockdowns, the second wave of the virus in Melbourne has played on people’s minds, potentially signalling an “era” where larger homes further from the city were more desirable than smaller ones closer in.

Despite the smaller number of young families now compared with years ago when Boomers were in their 30s, prices for large family homes had continued to rise, in part because the older cohort were keeping them for longer, he said. 

“You might think there’s going to be declining demand because there are just fewer large families that would need it,” he says. “There’s a distortion where the Baby Boomers are not selling them, so you do end up with inefficiencies and perhaps higher prices than would otherwise be the case.”

Baby Boomers were also likely to want to avoid moving to aged care facilities – at least until they absolutely had to, he says – making them even more determined to keep the family home for longer.

“So many mid-life Australians have said to themselves, if not out loud, ‘I never want to go to one of those places’,” he says.

But is ageing in place a practical desire? If people are living in the right sort of house, it very well could be, RMIT senior economics lecturer Sarah Sinclair says.

“People don’t want to leave their communities so they end up staying in housing that’s not appropriate, and then they end up with all of these issues because the housing has to be retro-fitted to support their needs as they age,” Dr Sinclair says.

She says people should instead be thinking about their needs as they age before they are unable to walk up the steps or navigate the steep driveway.

“There might be things about your existing home that are challenging as you age, and that might trigger people to think about downsizing, but to do it earlier – rather than when you have a fall or when you find you can’t do something you used to be able to do.”

She and a team researched some of the design attributes that made it easier for people to stay in their homes as they aged: step-free entrances from parking spaces, wider doors and corridors and downstairs toilets.

She says Baby Boomers should start thinking about how practical their house is now, adding that these design features should be seen as added value to homes, not just for older people but for every stage of life.

“Whether you’re wheeling a pram in or a wheelchair in – it’s about ‘lifetime homes’ rather than just housing for ageing.”