Australia’s property market is suffering from a chronic supply shortage, with high mortgage costs and a worsening rental crisis further tightening the market.
But there is one solution to Australia’s chronic housing shortage: Downsizers.
In fact, new data by financial services company Downsizer.com, reveals that there are some suburbs in each major city where the potential for downsizers to move and free up the supply of housing is promising.
Which is especially promising in the context of recent proposed legislation designed to encourage pensioners to downsize their homes in order to free up housing stock for young families.
The data shows that as many as 88% of people aged 65-74 are living in homes as single or dual occupancy properties, most of which (76%) are in properties with three or more bedrooms.
Outer western Sydney and the Blue Mountains, Melbourne’s outer west and Brisbane’s eastern suburbs have been identified as the areas ripe for downsizer activity with a significant proportion of the population being ageing Australians living in properties which exceed their needs.
South-west Perth, south Adelaide and south-east Tasmania have also been highlighted as areas with strong potential to help ease the national housing shortage.
In Sydney, the outer west and Blue Mountains, Sutherland Shire, Northern Beaches, outer south-west and the Baulkham Hills and Hawkesbury region are prime areas for downsizers to free up housing stock.
The higher the number, the more likely that there are downsizing candidates in that area.
For Melbourne, downsizer hotspots are focused on the outer east and inner south of the city.
Meanwhile in Brisbane, suburbs in the east of the city have the most downsizing potential, scoring 7.20 on the index.
For Perth, the south-west has the most potential for downsizing with an index score of 11.10, which is also the highest across all areas nationwide.
Close behind is the inner suburbs area, northeast and west, and the southeast also features on the chart.
In Adelaide, there are some good prospects for downsizers in the south and west of the city.
But there are also areas where there is a low chance of downsizing (represented by the numbers below zero), being the north and central and hills areas.
Similarly in Tasmania, while there is good potential for owners living in the south-east of the state, the west and north-west areas to downsize, downsizing prospects for those living in Hobart are low.
The mismatch between the larger number of underutilised rooms versus Australia's chronic supply shortage shows that more needs to be done to incentivise older Australians into more suitable housing in an effort to help tackle the property supply crisis.
While some incentives have already been put in place, such as the downsizer contribution that allows sellers aged over 55 years to contribute $300,000 from their sale of a family home into their super balance, there needs to be more.
Demographer Liz Allen told the AFR that the range of measures needed to encourage downsizing and free up much-needed housing stock extends beyond financial policies into areas of property and tax.
“I don’t see anything in the way of policy now or on the horizon that will help ease this mismatch of housing,” she said.
“In theory, an ageing population would free up family homes for upcoming generations as empty nesters move to smaller dwellings, but this simply isn’t occurring because a range of policy settings are just nonsensical.”
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More incentives to downsize would be helpful in encouraging empty nesters to downsize to a smaller property, but the problem is…. This generation doesn't want to downsize.
Sure it makes sense to move into a 1 or 2-bedroom apartment once the kids have left, but this isn’t a reality for most.
Many of these residents want to stay in the same neighbourhood in proximity to the same facilities they’re used to, some still want to support their children and have space for them to come home if they need to, and many are still working while wealth preservation is also a significant factor deterring a move.
And the last, and prime reason… there is a lack of suitable properties available for this demographic.
After all, property developers do not build apartments big enough for downsizers.
While these areas with the most downsizing potential make for interesting reading, they aren’t areas I’d suggest investing in.
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 help you because it’s also important 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.
After all, what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.