Once the kids moved out, parents will sell the spacious family home with backyard and move into a smaller 2-bedroom apartment.
Or so we thought.
A recent article published by The Sydney Morning Herald reveals that doesn’t happen as often. Instead of downsizing, older couples and even singles choose to stay put in big homes. Market watchers reckon this scenario creates economic challenges.
With retirees choosing not to sell, fewer homes are available for younger families with children. This situation limits the supply of available houses and therefore increasing the housing rates in Sydney. Consequently, prime-age workers and their children are forced to find homes far from the business district.
This scenario affects the availability of the labour force in the CBDs as people prefer to settle at locations closer to their jobs.
[ RELATED POST: You Don’t Need to Sell Your Home to Finance Your Retirement ]
Why does Baby Boomers choose to stay?
The SMH article discussed the following reasons why Australian seniors refuse to downsize:
Many baby boomers reckon it is better to park off their wealth in real estate than release home equity through a reverse mortgage.
The price of real estate in Sydney has increased over the decades, and Baby boomers want to help their children.
Instead of paying rent, they encourage their kids to move in so they can save up fast to purchase their own home.
Grandparents also help in raising their grandchildren, which further saves up money for childcare.
In the past, Australians would love to retire in a beach house or a new location with ‘greener grass and fresher air.
But baby boomers today prefer to retire in the comfort of their family and friends.
They choose to stay in the family home because they like the urban lifestyle instead of rural retirement.
Fear of Change
Some baby boomers are unsure about their future, so they choose to stay put instead of taking the risk.
With the rise of the knowledge economy, baby boomers are still in the workforce even if they are already retired.
Many of them are still hired as consultants or resource persons, so they need to stay put.
The quality of health services in the CBDs is better than in rural areas, so baby boomers choose to stay.
Baby boomers who tried looking for a smaller space found themselves in tight competition with first home buyers.
Tax and Welfare Concerns
Primary homes are not included in the Age Pension means test. Thus, baby boomers may lose a portion or all of their entitlements if they downsize.
Another issue is the stamp duty on buying a smaller home.
[ RELATED POST: How does a Reverse Mortgage affect your Age pension?
Is It Right to Blame the Baby Boomers?
True, the low supply of empty nests affects the housing market and the workforce in Australian cities.
But is it right to blame pensioners for choosing to hold onto their family home that they have acquired through hard work?
We love to hear your comments about this issue.