22-04-2025
Baby Boomers resist downsizing pressure as pensions put at risk: 'Something isn't right'
Older Australians, particularly wealthy ones, are reluctant to downsize despite coming under increasing pressure amid the country's housing crisis. There are sentimental reasons for holding on to an empty nest, but older Australians also grapple with supply shortages, costs associated with moving, and the possibility that a sale will impact their ability to access the Age Pension.
The Retirement Living Council (RLC) has called for a rethink on the pension assets cap and Commonwealth Rent Assistance (CRA) eligibility to make it less financially burdensome for Baby Boomers to downsize. RLC's executive director, Daniel Gannon, said it's "absurd" to think these "relics of the past" could keep up with modern-day house prices and the cost of living.
"Increases in Age Pension assets have failed to take into account the high level of asset wealth many older Australians now hold in their home,' he said.
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'This has the unintended consequence of discouraging 'asset-rich, cash-poor' older Australians from 'rightsizing' into more suitable housing.
'When government policy locks older people in their homes, something isn't right."The current pension assets cap is $314,000, and Services Australia spokesperson Hank Jorgen explained to Yahoo Finance how it works.
"So, let's say you sell your home for $1 million and you're planning to spend $700,000 on a new place— the leftover amount of $300,000 will be treated as an asset right away and counted under the asset test," he said.
But over a 30-year period to 2024, median house prices in capital cities soared close to 600 per cent, however, the pension assets cap has only risen by less than 180 per cent for a single person.
CRA eligibility stipulates you can't spend more than $252,000 on a home before your payment starts to be affected.
If these two policies are addressed, the RLC believes 94,000 seniors would be able to access retirement village housing options, and it could free up more than 59,000 homes to younger families.
The Council also said there could be reduced pressure on public housing, hospitals, and aged care facilities, and improve the quality of life for older Australians through age-appropriate living options.
Australian Seniors has revealed 69 per cent of empty nesters have decided to hold onto their home even though they might not need the extra space.
Those earning more than $200,000 per year or more were the least likely to want to move.
Across the Baby Boomer generation, only 19 per cent have moved into a smaller property after their children moved out, while 13 per cent are considering it.
South Australia was found to have the biggest contingent of Boomers remaining in the family home at 79 per cent.
Yahoo Finance contributor David Koch said it's understandable why so many don't want to sell the empty nest.
"Moving can be a hassle - especially when we have so much stuff," he wrote.
"We have some of the biggest houses in the world and we keep buying stuff to fill the space. So, when it comes to downsizing, decluttering can be a sizeable effort.
"Finding a new place can be extremely hard and, right now, supply of housing options falls way short of demand.
"The government's failure to plan for our growing population has left many in the lurch. And then there's the cost [like paying stamp duty]."
But Koch said pushing through "property paralysis" can give you the option of topping up your retirement fund.
"Downsizers can make a contribution of up to $300,000 into their super when they downsize their home," he said.
"It's a great boost, especially if you're over the age threshold for making voluntary contributions."
It's not just cost that has stood in the way of some older Australians from shifting into a smaller home.
"We're seeing the whole gamut of age ranges moving back in with the parents," ANU demographer Liz Allen told The Project.
"And they're returning, not just with themselves and maybe a cat, but also with kiddos. So then we have this massive readjustment and renegotiation of what it is to be a parent and a grandparent."
Finder found one in 10 have either moved back home with their parents or had an adult child return home recently to avoid soaring property and rent prices.
Research consulting firm MyMavins also discovered up to 80 per cent of empty nesters are open to having their kids move back in with them.
But, if a Baby Boomer decided to downsize to a one or two-bedroom home, this trend could be significantly curtailed.
Providing additional incentives to older Australians could be key to helping release more stock into the housing market.
ING Australia chief executive Melanie Evans suggested state governments could reduce the amount of stamp duty downsizers have to pay.
'You've got a transaction cost, and then I have $500,000 worth of capital that used to be in a tax-effective or tax-free environment,' she said.
Nationals leader David Littleproud believed that idea has "merit".
'We do it for first homebuyers, why wouldn't we allow those who want to get out and downsize to have the stamp duty exemption,' he told Channel 7.
Tax concessions for downsizers has previously been supported in NSW, however the proposals haven't progressed much further.
Federal housing minister Clare O'Neill said stamp duty is a state-based issue and the government wouldn't be getting involved in that.
While both Labor and the Coalition have put forward major housing policies ahead of the May 3 federal election, neither have addressed the issues faced by Baby Boomers wanting to in to access your portfolio
