Downsizing is key for Australia’s ageing population to continue to thrive and achieve their goals, especially post retirement, according to experts.
In a time where the cost of living is rising rapidly, which in turn impacts life after work, downsizing can be the solution to reduce financial stress in later years.
On Property Hub’s Get Invested podcast, Downsizer.com CEO Mark MacDuffie and economist Michael Blythe joined Bushy Martin to talk about the benefits of downsizing and how Australians can overcome the challenges.
What is happening to the Australian population?
“The population is now moving into the the older age brackets, and that’s bringing with it, I think, a whole series of challenges for the home owners, for the people who build those homes, for governments and for the economy,” Michael said.
“The bottom line is that the population bulge is increasingly living in houses that are inappropriate for them, that are costing too much to maintain at a time when their incomes are being squeezed by a whole range of factors as well.
“And so that is going to require a change in focus. When I first started looking at this issue, something like 80 – 90% of people want to stay where they live right now. And you can understand that they know the local area, they like the house they’re in and the rest. But out of that 80% or 90%, only about 60% of them actually have a plan on how they’re going to achieve that. So a lot of people have this idea of what they want to do, but they’ve got no idea how they’re going to get there. And this is something that we really need to focus on, not in ten years time, but now because it’s happening now.”
What needs to change?
The duo believe Australians, from a young age, need to adopt a mindset which considers the long term future, especially post retirement.
“We spend very little time worrying about the certainties, and one of the certainties is that we are all going to get old and all the things that are associated with that. So one of the issues here is really getting that mindset in place where we think about these longer run issues,” Michael said.
“There’s one aspect that hasn’t been favourable to baby boomers, and that is the superannuation story. They tend to have much less superannuation than younger households, mainly because they’ve been in the superannuation system for less time than these younger age groups have. They haven’t had that compound interest effect working for them as long as today’s younger households will have. And again, that’s something I think a lot of households haven’t really focussed on. So the issue to me is really getting that kind of mindset in focus where we start to prepare for these things before we hit that critical age, rather than scrambling around when we’ve gone past the point where we should have done something.”
At what age should you downsize?
“The kind of pivot for a lot of people is when they finally retire. And that, I suppose, is probably sooner than it used to be. But you tend to see interest in downsizing increase, I think, in that kind of 60 to 65 age bracket. This is when people start to look ahead and wonder how they’re going to fund the lifestyle they want on the one hand, and the longer life they expect to have on the other,” Michael said.
“But it’s also true to say, when you look at the various surveys, that the age group where this is starting to come into focus is now a little bit lower as well. So that kind of 55 to 60 bracket is starting to see some interest as well.”
Where can downsizers get help?
Downsizing comes with many challenges, especially for those who don’t have a support network of their own. That’s why using businesses such as Downsizer.com can help with the process.
“We had a 79 year old who had almost no super at all and less than $10,000 of savings, and his utility bills were the most expensive he’s ever experienced. He can’t maintain his garden anymore because he’s 79 and he can’t maintain his house. But he has a line of credit from one of Australia’s banks that’s accruing interest on a daily basis. So he can’t make those payments. So we’ve helped him secure his next house with zero cash deposit because he has a house that he’s been in for thirty years that is worth more than $1,000,000. So we helped him move into his next property,” Mark said.
“And this is pretty stressful for someone that’s living on his own. His kids and his grandkids live interstate, so he doesn’t have a great deal of support. So that is an incredibly stressful exercise. And so this purchaser was quite audibly emotional when we told him we would do that for him because it was an anxiety, and he didn’t know where to start.
“So that’s an example of the emotion that these buyers are going through. They’ve lived in their properties for 15, 20, 30 years, and some of them have a lot of memories. And as Michael said, the data tells us that they don’t move very far.”