‘Forced to stay put’: Financial adviser defends controversial Aussie Boomer housing trend

Australia’s oldest empty nesters are being “forced” to stay put in oversized homes that could better serve young families.

Baby Boomers living in oversized homes that could better serve young Aussie families are being “forced” to stay put due to lack of incentives, experts have argued.

Just 19 per cent of empty nesters in Australia moved into a smaller property after their children moved out, an Australian Seniors survey found in April, versus a whopping 69 per cent who had chosen to hold onto the family home.

According to the survey, the least likely to move on were high net worth individuals – only 8 per cent of those worth over $200,000 had downsized.

To the thousands of young Australians for whom property ownership seems like more and more of a pipe dream, such statistics probably read as selfish – especially given a Retirement Living Council (RLC) report this year found 59,576 homes could be unlocked if older generations were to downsize.

Yet financial adviser Helen Baker told The Daily Mail on Sunday there was a fair reason why Boomers were hesitant to let go: to protect – and maximise – their pension entitlements.

Research has found older Australians downsizing could free up nearly 60,000 homes across the nation. Picture: Damian Shaw/NewsWire

MORE:‘Kiss your pension goodbye’: Radical plan to remove Boomers

If a couple were to sell their $2 million Sydney home and purchase a $1 million property somewhere like Port Macquarie, the $1 million windfall could affect their age pension eligibility due to the federal government’s assets test, Ms Baker explained.

Though property is exempt from the test, leftover funds in cash or superannuation are counted.

Older Australians are therefore delaying selling their homes – even if they no longer need the space – until they’ve run out of super and downsizing is their back-up to release more cash.

Lack of incentives ‘force’ Boomers to stay put

According to social analyst and demographer Mark McCrindle, potential downsizers are perturbed by the financial burdens associated with selling and repurchasing – but the greatest barriers are the emotional and practical ones.

“This is the home they raised their children in – to give up that family home is to give up sentimentally and is a signal that the parenting stage has ended,” Mr McCrindle said, adding that “many (parents) don’t want to admit that”.

A financial incentive from the federal government was needed to encourage older people to “right-size” and move to more suitable accommodation.

“They don’t want to be penalised when they downsize,” Mr McCrindle said.

“The support of others can get through the practical and emotional blockages, where the young people step in and say, ‘Don’t worry about the move and decisions, we will help’.”

High networth individuals were the least likely to consider downsizing once the nest was empty. Picture: NCA NewsWire/David Swift

MORE:80s Aus home prices expose boomer lie

PropTrack senior economist Eleanor Creagh agreed that the decision to downsize “isn’t just financial” but “very personal”.

“And the cost of stamp duty and a lack of suitable alternatives is a disincentive for a lot of older Australians – particularly given all the emotional and cultural factors at play,” Ms Creagh continued.

Retirement Living Council executive director Daniel Gannon noted that many retirees were trapped in an “asset-rich, income-poor” scenario.

“The financial disincentives to ‘right-size’, including harsh pension penalties, force them to stay put, despite the huge benefits of transitioning to retirement communities,” Mr Gannon said.

“Older Australians must be reassured that ‘right sizing’ is financially safe, not a decision that results in monetary loss.”

’The financial disincentives to ‘right-size’ … force them to stay put.’ Picture: NewsWire/Damian Shaw

‘Silver tsunami’ can’t solve crisis

In the United States, analysis by leading real estate marketplace company Zillow last December found that a “silver tsunami” – a wave of empty nesters selling their properties and downsizing – would do little to curb the nation’s housing affordability crisis, given they often weren’t located in areas where demand is highest.

“Even if we did see a ‘silver tsunami’, a look at the map tells me it wouldn’t really move the needle in terms of solving our housing affordability crunch,” senior economist Orphe Divounguy said.

“These empty-nest households are concentrated in more affordable markets, where housing is already more accessible – not in the expensive coastal job centres where young workers are moving and where more homes are most desperately needed.”

A ‘silver tsunami’ might not be the answer to the housing affordability crisis, experts in the US have warned. Picture: NewsWire/Dylan Coker

Data from Finder in Australia also found in November that cashed-up Baby Boomers looking to downsize were eyeing the same coastal hotspots as young buyers hoping to get on the property ladder.

The research determined its findings by assigning each hotspot a “Downsizers Index”, calculated by multiplying the suburb population with the percentage of those aged 65 or older and the percentage of those who lived at another address a year ago and then ranked out of 100.

Queensland proved to be Australia’s hottest retirement destination – particularly the Gold Coast’s Main Beach, where 37.1 per cent of all residents were aged over 65, 21 per cent of whom had been living at another address 12 months prior. It earned a Downsizers Index of 8 per cent – the highest in the nation.

“It will be interesting watching the property prices in these areas, because obviously when people are retiring they’re downsizing from a house they’ve most of the time paid off the mortgage for, so they’re moving with cash and they have a lot more flexibility in terms of adapting to price demands,” Finder’s head of consumer research Graham Cooke explained.