Budget 2017: Downsizers see the upside to super reforms

Analysts are divided over the ­impact on house prices from the budget’s new downsizing assistance measures, but fund managers are in no doubt the measure will boost amounts flowing into sharemarket funds.

In a note to investors Hasan Tevlik of Credit Suisse suggests the downsizing incentives will have a positive implication for a range of listed fund management groups which will now be in a ­position to receive higher super contributions from a small but relatively wealthy demographic.

Contributions to super are ­invariably put into balanced funds where the bulk of the assets are in local and overseas shares as well as bonds.

Fund managers tipped to benefit from downsized’s elevated super contributions include AMP, BT, Challenger, IOOF and even specialists in offshore share markets such as Magellan and Platinum.

The new “downsizing assistance” measures will directly help people over 65 who are selling their family home in order to downsize. Under a variation to ­existing super rules they will be ­allowed to put in up to $300,000 in non-concessional (after tax) super contributions without having to satisfy so-called work tests.

But any uplift for residential property prices will most likely be limited to apartments and townhouses.

“The program may well ­become quite popular, though it is restricted to seniors looking for a smaller property and if they are going to be putting on average $300,000 into super then it is not going to go back into the property market — it will go into managed funds which will most likely invest widely,” financial adviser James Gerrard said.

Though the government’s high-profile first-home buyers ­assistance package has been welcomed by the property industry, the downsizing package has had a muted response.

The first-home buyer package is expected to be particularly useful to builders such as Stockland, where first-home buyers ­account for 50 per cent of the group’s residential sales, and Mirvac, where the first-home buyer group represents 25 per cent of sales.

In contrast, the new measures in relation to downsizing have been given a limited welcome as it helps only those who are making super contributions; it leaves the much wider issue of pension ­access unchanged.

Some lobby groups had hoped the government would allow ­seniors to sell their family homes under a scheme which would not affect their access to the age pension, which is means tested. Such a move would have affected a much wider segment of the retiree population.

According to Ben Myers of the Property Council of Australia, “the move will encourage some seniors to downsize”. “But we note the ­national seniors council of Australia has ­declared asset-testing ­exemptions (for the pension) to be the most ­effective method of ­removing ­downsizing barriers,” Mr Myers said.

“The federal government’s announcement is a very positive step forward but we hope it will be the first of several steps to remove the remaining barriers to downsizing. Retirees and pensioners don’t ­deserve to be penalised for making housing choices that suit their needs”.

The property council estimates the pensions test is blocking up to 50,000 people from downsizing.