In late 2015, a major research report was released by the Productivity Commission on the housing decisions of older Australians, and the impact of government policies on those decisions. The report was partly informed by a survey of more than 1500 Australians aged over 60 by the Productivity Commission, gauging their attitudes on a range of issues from financial planning for retirement to bequest plans.
Unsurprisingly, the survey found there was a strong desire of the vast majority to stay in the family home for their entire retirement. Interestingly, it also found that the majority regarded their home as their safety net if an adverse financial event occurred in the future.
Nearly 19 per cent of survey respondents had ‘downsized’ or moved to a less expensive property. The most common reasons were to:
- Spend less time on home maintenance
- Move to a home that was more age appropriate (without steps or stairs, for example)
- Be closer to family
- Be closer to amenities (hospitals, public transport, shops, etc.)
- Free up some money to save or spend on other things
Forty-one per cent of downsizers completely saved the money freed up from the sale of their home, as they wanted to put money aside for unforeseen expenses, planned to use it on health and care services, or wanted to use that money to pay for travel. Thirty-two per cent completely spent the money, most commonly to modify their new property, pay for new appliances, pay bills or debts or repair or replace their car.
Of the remaining 81 per cent of people who hadn’t downsized, about one sixth considered themselves likely to downsize to a less expensive property. The remainder weren’t considering such a move, as they wanted to stay in their own home for as long as possible, believed it was the most suitable home for them, liked the area the home was in and didn’t want to move out of it.
“Housing is integral to people’s wellbeing, particularly for older Australians,” the Productivity Commission’s report concluded. “The survey data and other evidence of older people’s housing decisions unambiguously reveal that the majority of older people prefer to ‘age in place’.”
“This does not necessarily mean never leaving the family home… For some people, their care and accommodation needs may be better addressed by accessing age-specific housing options, such as a retirement village, mobile home community, or ultimately residential aged care.”
For those looking to downsize, the Productivity Commission identified a “general lack of affordable downsizing options for older Australians”, due to issues with planning regimes. It’s likely that more and more people in the future, even if this number remains a minority of all seniors, will want to downsize – theAustralian retirement village population has grown to more than 184,000 for example – but a lack of new housing in suitable areas may make the move difficult for future aspiring downsizers. The survey also confirmed the widely held belief that older Australians are “asset rich” and “income poor”.
“About 80 per cent of [older Australians] are home owners who benefited from significant growth in house prices, particularly in the nation’s capital cities — about 5.5 per cent per year on average over the past decade. However, the vast majority of retirees have low incomes and rely substantially on the age pension,” the report states.
Despite this, there was a prevailing attitude, especially among older retirees, of the importance of continuing to save and put money away, even when the pension was their only source of income. Many people do this in order to leave a bequest for their children when they pass away, although other surveys indicate this is a less important motivator for more recent retirees.
Finally, the survey found many older Australians don’t always plan as well as they believe they should for their own retirement, which “can mean that holding on to the family home can become an expensive form of self-insurance”.
The conclusion to draw from this report is that forward planning and research is an essential part of ensuring a comfortable retirement, whether you want to stay in your family home or are thinking about downsizing to a smaller home like a retirement village villa or apartment. Talk to family and friends, and seek specialist financial and legal advice if necessary, to ensure your next 20 or 30 years are as financially and emotionally stress-free as possible.
The survey also confirmed the widely held belief that older Australians are ‘asset rich’ and ‘income poor’.
The Retirement Living Council is the only national organisation solely focused on advocating on the critical issues facing housing and services for older people, supporting and promoting members and the retirement living industry at large.