Downsizers' frustration as housing needs not being met
A combination of policy disincentives and a lack of suitable housing supply is making it difficult for those wanting to downsize their property for lifestyle and financial reasons.
Downsizers are an important and growing part of the property market in Western Australia and indeed across the country.
We have an aging population combined with a trend toward smaller family units that is having an impact on the size of homes required to suit household needs.
According to the most recent Census data, the median age of people in WA has risen from 25 years in 1971 to 38 years in 2021. The largest proportion of the population by generation are Baby Boomers aged between 55 and 74 years-of-age.
With a growing number of empty nesters and single person households, the requirement for smaller, more compact and easy-care housing options is growing at quite a rapid rate. This is at odds with the predominant housing product we continue to see all across Perth, which is single homes on a green title lot, generally with more than three bedrooms.
The disconnect between the types of homes we are delivering to the market, and the trends we are seeing in terms of shrinking households, is an important aspect to consider during the current housing supply crisis that we are experiencing in Western Australia.
While government and industry are acutely aware of the need to deliver housing across the continuum, from social and affordable homes through to standard and high-end properties, we also need to make sure we are focusing on delivering a diversity of housing types, including medium and high-density apartments, in order to meet current and future needs.
Hundreds of thousands of potential downsizers
At a recent industry event hosted by UDIA WA, Michael Blythe, Economist in Residence at Downsizer.com, provided a keynote address that outlined the latest research from his company in relation to the downsizer market in Western Australia.
The research has found that there are approximately 190,000 potential downsizers in Western Australia who would like to a move into a smaller home within the next two years.
The research shows that these people are generally aged between 60 to 70 years old and the majority live in larger dwellings with three or more bedrooms. Overall, many live in homes that are valued at over $1 million, however, they want to move to a smaller property valued at less than $1 million.
Importantly, downsizing can unlock significant equity, with Downsizer.com finding that the average expected equity release is sitting at around $390,000 per household.
Importantly, the equity that is released can be put toward eligible downsizers superannuation. The Federal Government has a scheme where those aged 55 or over can put up to $300,000 of downsizing sale proceeds into their superannuation. The figure is $600,000 for couples.
According to Mr Blythe, the eligibility is not dependant on superannuation balance, age or work status.
The financial advantages of downsizing, coupled with the attractive lifestyle proposition for many older Australians seeking more low maintenance homes, is a big incentive for many people to consider moving to a smaller home.
However, the problem remains, where are the downsizing options for people in a city like Perth when most of the stock is larger homes?
Government’s apartments incentives
UDIA WA has been calling on the state and federal governments for some time now to focus on boosting housing supply, and in particular to support the medium and high-density sectors in delivering more housing to the market.
There is certainly no silver bullet to what is a wicked housing supply issue, however, in looking at pulling a range of policy levers, government can certainly make a difference, particularly when it comes to cutting red tape and streamlining lengthy approvals processes.
We know the State Government here in WA has a strong focus on achieving higher levels of infill development and increased density in a range of areas along transit corridors and in activity centres.
The Planning Reform agenda has been progressing, and more recently we have welcomed direct action to support the apartment sector.
Just this week, Premier Roger Cook announced an expansion to the Transfer Duty Concession Scheme to include apartments under construction.
The Off-the-Plan Duty Concession Scheme was welcomed when it was introduced as an incentive for new-home buyers to choose an apartment off-the-plan. By expanding that scheme to include apartments that are already under construction, it widens the eligibility criteria under the scheme and allows more buyers to access the concession.
Apartment developers have been finding it increasingly difficult to make projects stack up financially given escalating materials costs, skills shortages and high cost of infrastructure upgrades and provision.
Through this expanded scheme, developers can attract more buyers to the projects they already have under construction, so they can then use that capital to move onto their next project, which should lead to the delivery of more apartment projects to the market overall.
UDIA WA also recently welcomed the State Government's allocation of $15.45 million as part of the $80 million Infrastructure Development Fund, which will help support 15 infill developments in the coming months by covering part of the headworks costs.
Overall, we are seeing action on a range of fronts that will hopefully lead to more diverse housing options for buyers, including downsizers, in the Perth market.