So it’s interesting then, to be able to identify the hotspots in each Australian city where we could see an uptick in the supply of family homes.
Especially in the context of new proposed legislation designed to encourage pensioners to downsize their homes in order to free up housing stock for young families.
In mid-September, Labor introduced a Bill to parliament that would give age pension recipients more time before the proceeds from the sale of their homes affect their pension payments.
The Social Services and Other Legislation Amendment (Incentivising Pensioners to Downsize) Bill 2022 would give pensioners an additional 12-month asset test exemption on their home sale proceeds.
Labor says the exemption is designed to give people more time to purchase, build, rebuild, repair, or renovate a new principal home before their pension is affected.
The incentive is in addition to the downsizer superannuation benefit which allows older people to put up to $300,000 into their super using the money from the sale of their main residence, regardless of caps and restrictions that otherwise apply.
The incentives have been put in place to try to free up big family homes for those that need them and encourage older people to move into more suitable homes.
While it is difficult for families to find big enough homes, particularly in desirable suburbs, the capacity in existing homes is high, a recent Ray White economic update explains.
It is estimated that there were around 13 million spare bedrooms in Australia with many older people living in homes with several spare bedrooms, Nerida Conisbee, Ray White, chief economist, said.
Reducing the financial burden of downsizing could see an uptick in the supply of new family properties for sale, particularly in areas where the population of over 65's is the highest.
The Australian Bureau of Statistics recently released data on where most people aged 65 and over live.
The data shows that for Sydney, Cronulla - Kurnell - Bundeena in Sydney’s south, has around 4,850 residents aged over 65 for their $3.25 million median priced properties.
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Meanwhile, in Melbourne, Rosebud - McCrae has the largest population of over 65s (7,635), many of whom are residing in the suburbs’ $890,000 median-priced properties.
In Brisbane, the top downsizer hotspot is Cleveland which has 4,806 residents aged 65+ and a median property price of $850 million.
While some suburbs may contain a lot of older Australians because there is a retirement community or aged care facility, the mix of where the most 65 plus years residents are is an interesting mix, Conisbee said.
“It includes some very desirable suburbs such as Glenelg in Adelaide, Sandy Bay in Hobart, and Brighton in Melbourne where there are likely lots of families keen to settle into big family homes,” she said.
Baby Boomers don’t really want to downsize.
Sure traditional thinking said that once the kids moved out, parents will sell their spacious family home with a front and backyard and move into a smaller 2-bedroom apartment.
But, as I said, that’s not happening.
Instead of downsizing, or “right-sizing” as it is being fashionably called nowadays, older couples and even singles choose to stay put in big homes.
A few reasons why the Boomers refuse to downsize include:
- Rather than see change or tree change, many Baby Boomers want to stay in the same neighbourhood - in proximity to the facilities there familiar with, the same hairdresser, the same dentist, and where their friends and family are. Boomers today prefer to retire in the comfort of their family and friends.
- Lack of suitable accommodation in locations where they want to live - developers are generally not building large enough apartments for downsizes
- Wealth Preservation - many Boomers feel safe parking their wealth in real estate.
- Support their Children - with the cost of buying a new home increasing, some baby boomers help their children by encouraging them to move back home so they can save the deposit faster.
- Many are still working - with the rise of the knowledge economy, more Baby Boomers are still in the workforce even if it is only part-time.
So while it’s interesting to look at these Downsizer Hotspots, these are not areas we’d suggest you consider as investment-grade locations.
At Metropole, we always advise on the importance of investment-grade properties and locations, rather than chasing a hotspot or growth area.
That’s areas and properties which hold their value over the long term, rather than benefit from an uptick in demand.
But even before looking for the right location, make sure you have a Strategic Property Plan to steer you through the upcoming challenging times our property markets will encounter.
Because aside from remembering that you should focus your efforts on investment-grade properties and locations, you also need to remember that property investing is a process, not an event.
That means that things have to be done in the right order – and selecting the location and the right property in that location comes right at the end of the process.
And that’s because what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.