Downsizing is part of the plan for many people approaching retirement age. We take a look at the pros and cons of this strategy.
When they hit retirement age, many long-term residents of Sydney’s Hills District wish to stay in the area. If you’re in this demographic, moving to a smaller and more convenient home or apartment is an option that frees up capital while allowing you to stay close to friends and family.
Selling the family home can make sense, especially when you no longer need those fourth and fifth bedrooms, or find it harder to keep up maintenance on the pool or large garden!
Take a look at the pros and cons of downsizing in The Hills District.
Pro: Less space… and less work!
Downsizing gives you the freedom to forget about mowing lawns, repairing verandahs and vacuuming rooms you don’t use any more.
Relocating to a strata building can cut down on maintenance requirements even further as many issues are taken care of by the body corporate. Purchase one of the many luxury apartments being built around Castle Hill, Kellyville, Cherrybrook and Baulkham Hills and you’ll have the benefit of security parking, lifts and swimming pools and gyms.
Enjoy resort-style living without the stress of upkeep.
What’s more, apartments are a lot easier than houses to ‘lock and leave’, meaning you can finally book that cruise or head off to adventure around the Outback.
Con: The emotional stress of downsizing
Many Baby Boomers in The Hills District have lived in their homes since before they started their families. With a home so full of memories, it can be hard to imagine saying goodbye.
Doing a clear out is a good first step to break down the emotional barriers to moving. If the task seems insurmountable, a professional decluttering service can be brought in to walk you through the tough decisions, such as what to do with a lifetime of photos.
If the thought of leaving your home is not a pleasant one, talk to friends and family who have already made the change. Take a look around the market and see what is available; once you see the benefits of a more contemporary property you might begin to feel more at ease with the idea.
Pro: Contributing the proceeds of downsizing to superannuation
As announced in last year’s Federal Budget, from July 2018 individuals will be able to make a contribution to their superannuation of up to $300,000 from the proceeds of selling their home.
According to the ATO, these contributions will not count towards the concessional or non-concessional contribution caps. The individual making the contribution will not need to meet the existing maximum age, work or $1.6m balance tests for contributing to super.
This penalty-free contribution (couples can contribute twice as much) can make a big difference to your retirement funds.
Con: Impact on pension payments
Right now, a couple can own $380,500 in assets (excluding their home) and still receive the full age pension. Selling the home, buying something smaller and having the resulting cash in the bank may have an impact on your pension.
Know your numbers and consequences of selling before you list your home for sale.
Your best approach is to speak with your financial adviser about how your assets will affect your pension payments. They will be able to advise you on the best place to keep your money after you sell.
Con: The hidden costs of downsizing
No matter where you live, there are expenses involved. An apartment building with a lovely pool, gym and gardens will incur higher strata fees in order to maintain these assets (but remember that the upkeep on your own home still costs you money). A more upmarket suburb may charge higher council rates, so this is also something to keep in mind.
Then there is the cost of selling your home itself, including:
- Pre-sale repairs and upgrades
- Agent commission
- Capital gains tax
- Home styling during your sale campaign
- Moving expenses
Downsizing costs can add up but this doesn’t mean you can’t come out on top. It is important to work with a reliable agent who will help you maximise the value of your family home with a strategic marketing campaign.
Pro: You’ll still be making money in The Hills
The property market in The Hills District may have dropped from a boil to a simmer in early 2018 but this does not mean home owners are losing value. Make a savvy purchase on a modern property that is close to amenities and you will continue earning equity, even in retirement.
There’s also the savings factor of a smaller property, including lower electricity bills and cheaper transport costs if you move somewhere within walking distance of shops and public transport.
Best of all, once you’re cashed up and you have less home maintenance, you’ll have the time and the money for a family holiday.
Con: Losing the space for family
Even if the kids have flown the coop, it is always nice to welcome them home.
Downsizing can limit your ability to host a crowd in your own home. However, many retirement villages and apartment blocks have ample communal spaces that can be booked and used for barbecues and gatherings. Shop around The Hills and look for something that provides this as an option.
Pro: A whole new lifestyle in The Hills Shire
With an incredible array of activities and support networks on offer for seniors, The Hills District is becoming an increasingly popular retirement destination.
Many downsizers find retirement provides a whole new lease on life. They have a smaller home that gives them more free time, they’re able to live comfortably thanks to the sale of the family home, and living in a retirement village or apartment block gives them access to a whole new community of friends.
To find out more about selling your home and downsizing in The Hills District, contact Stone today or download our guide to selling.
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