When commentators say downsizing doesn’t stack up financially, they’re overlooking a crucial piece of the picture.
Imagine this. The kids have left home (or at least you’d like them to), the garden – once your pride and joy – is now becoming a maintenance millstone, and you crave the excitement of trying some new cafes or restaurants. The local Chinese was a trusty standby when the kids were growing up, but you’re more than ready for something a little more sophisticated – and distinctly less predictable.
It’s a familiar story among many empty-nesters.
A family home in the suburbs can be the ideal place to raise…well, a family, of course. But after one, two, maybe three decades in the same home, your life has changed and all that was once so appealing about your place – and your postcode, has started to lose its lustre.
This is often a pivotal issue for downsizers. The decision of whether or not to downsize doesn’t always boil down to concerns about paying stamp duty on a new place (which probably pales in comparison to the tax-free profit you’ll make on your home when you sell). Nor is the decision to downsize based purely on cost-benefit analysis. People rarely operate that way when it comes to their home and lifestyle choices.
It’s all very well for example, for pundits to claim that downsizing means paying transaction costs. That’s a no-brainer. But after decades in the workforce, raising kids and maintaining a big family home, surely you’re entitled to some “me time”.
The other factor that often gets overlooked in the downsizing debate is the sheer amount of money that large homes can chew through in maintenance costs. A popular rule of thumb is to allow 1% of your home’s value each year in annual upkeep. Think about it. If your place is worth $800,000, you could be spending $8,000 per annum to just keep the gardens looking good, the pool clean, the carpets fresh and so on. That’s not a one-off cost like stamp duty. It’s a recurring expense that you need to pay year after year.
No wonder that downsizers are happy to pay strata levies! It means someone else has to deal with maintenance – and as we age that can be worth a lot more than dollars and cents.
Bottom line is, yes, downsizing can be a financially driven decision. This especially applies if you need to unlock home equity to help fund your retirement. But to suggest that downsizing can leave empty-nesters out of pocket is to overlook some of the most basic costs of home ownership – and ignore the reality that downsizing is an exciting opportunity to start afresh, live life on your own terms, and enjoy a low maintenance lifestyle.
Amanda Graham is Co-Founder and Co-CEO of Downsizing.com.au and Seniors Housing Online.