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Many parts of the Australian property market have been suffering from undersupply for some time now, but experts believe they might have come up with a solution. The issue of downsizing has recently been thrust into the spotlight, as the industry looks for new ways to free up properties.
Older Australians need access to all retirement living options.
Not only will this mean there are more homes for sale, but that there's also potential for prices to come down, too. It's retirees who are the focus of these most recent investigations into the market, with two major groups explaining how they could hold the key to affordability and supply.
Bringing down barriers
The first challenge is to bring down the barriers preventing retirees from moving into smaller homes, the Property Council of Australia believes. The group's executive director of retirement living Mary Wood revealed that many retirees have equity in their family home that could be freed.
"Older Australians need access to all retirement living options, and the penalty on downsizing should be removed for all pensioners, not just those who buy annuities," Ms Wood commented.
Similar views have also been echoed by the Real Estate Institute of New South Wales (REINSW), which has also suggested that tax incentives should be available to downsizers. Broadening the scope of the senior citizens transfer stamp duty exemption could be one way of making this happen.
Not only this, the REINSW has called for the new home restriction to be lifted alongside the purchase price cap. At present, the New South Wales Home Builders Bonus applies to new homes that don't exceed $600,000 in value, and applicants can't be under 65 years old.
A report from the Australian Housing and Urban Research Institute (AHURI) titled 'Downsizing amongst older Australians' shows there are generally three barriers to downsizing. These include improving the amount of available dwellings and suitable locations, removing financial disincentives and dealing with psychological and practical barriers.
Appropriate housing
The Property Council argues that older Australians need access to a wider range of housing options. Whether they decide to move into one of the country's many retirement villages or a smaller piece of real estate, this could be just what the market needs to get moving again.
Figures from the group show there are already around 200,000 people in retirement villages, and their popularity is increasing even further.
The REINSW pointed out that many of the country's larger houses are now occupied by empty nesters. As a result, families who are searching for a home loan to secure their first property may find it increasingly difficult to get the amount of space they require.
"There should be incentives to encourage them to sell and buy more appropriate housing," indicated REINSW president Malcolm Gunning.
"This measure should also increase supply of larger homes in established suburbs, improve affordability and stimulate better use of existing infrastructure."
The AHURI's analysis of the situation describes this as a "win-win policy" that would encourage people to live in their own homes independently as long as possible. It also conceded that many aspects of the tax regime don't take the needs of elderly people into account, which is something that needs to change.
Besides the benefits to the national property market, the AHURI also revealed that downsizing can lead to significant health and lifestyle benefits to retirees. Living in a more manageable property can be less stressful in the long run.
People have different motivations for downsizing, but on a national level they could be crucial to alleviating some of the supply pressure concerns. The next step is to introduce the right policies that can make this happen, both on a state and federal governmental basis.
