Did you grow up on a classic suburban quarter-acre block? Is it still in the family? If so, it could be the secret to unlocking big cash reserves for your parents, or for you and your siblings.
As tempting as that might sound, though, it will almost certainly be worth your while to pause and think about the implications of such a move before diving headlong into a plan to sell the family home and downsize.
There are quite a few things to consider, and several questions that are probably worth asking before making any decisions about downsizing. These include:
- Are you and your family ready to let go emotionally of a house that has shaped your lives and perhaps holds many memories?
- Will selling the family home actually provide the financial windfall and/or cash reserves you expect it might?
- Is your – or you parents’ – new, downsized lifestyle what you (or they) are really after?
Read: Podcast: The who, what, where, how and why of downsizing
These are questions I’ve had to ask myself in recent years. Dad passed away in 2014 and Mum followed four years later. Mum spent most of her last two years in a nursing home but it was not until well after she passed away before my siblings and I sold our old classic suburban home in Melbourne’s west. Even then, several of us struggled with letting go of a patch that had been our home, our anchor, for more than half a century.
For my parents, downsizing was never an option while they were healthy. They loved nothing more than pottering about, inside and out, and us kids loved nothing more than popping in to see them with our own growing families.
But that option might not be everyone’s cup of tea. Not everyone was a borderline hoarder like my Mum. And some people don’t have the same emotional attachment to what is really no more than a tiny square of earth that my family did.
Read: Explainer: How does the ATO define ‘downsizing’?
For them, downsizing might be a godsend. Having much less space and far fewer items to manage might be their version of heaven. In such a case, selling up and moving on might be the best move of all.
Importantly, though, the financial aspects must be thoroughly examined. What has held back some potential downsizers has been the prospect of spending almost as much on a smaller property as the sale price of their house.
But former chief economist at Commonwealth Bank Michael Blythe, who is now a downsizer.com economist, says the dynamics in this area have changed.
“The price gap between houses and units is widening and is now as large as it has ever been. This larger gap is a powerful financial incentive to downsize,” he says.
Read: How selling and downsizing affect your Age Pension
Downsizer, it should be noted, is in the business of selling property to the ‘downsizing’ demographic, so Mr Blythe’s advice, as sound as it may be, should form only part of any decision-making process.
Brenton Miegel, a director at Goldsborough Financial Services, says it’s important that seniors are emotionally ready to downsize, and should also consider the Age Pension implications of downsizing.
“Don’t be reactive to what the property market is doing,” Mr Miegel says. “Seek financial advice.”
Downsizing may feel like a sensible, rational and prudent thing to do, but taking into account the emotional needs of family members is an important part of process. Taking the time to consider the needs, emotional and otherwise, will likely enhance the chances of making the long-term decision that’s right for all.
Remember that before saying a final goodbye to the quarter-acre block of your childhood.
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