According to BIS Oxford Economics' latest report, there hasn’t been a significant increase in the number of retirees downsizing since 2011.
However, the “glacial” increase in downsizing retirees could pick up pace as mortgage burdens begin to sting, the Emerging Trends in Residential Market Demand report hypothesised.
The percentage of Australians between 50 and 64 with a mortgage has increased from 20 per cent in 1996 to 42 per cent in 2016, with a respective fall in the equity they hold in their home.
BIS Oxford Economics residential property senior manager, Angie Zigomanis said this will push retirees to consider downsizing and in turn raise demand for smaller unit-style living.
“Households will increasingly still have a mortgage once the occupants reach retirement age,” he said.
“Unless the occupants elect to remain in the labour force, there will be an increasing number who are likely to sell out of their dwelling upon retirement to move elsewhere or into a lower priced smaller dwelling to reduce their debt.”
Naturally, retirees will be looking to downsize without moving outside their established area, which will also push up demand for units and townhouses and place them in direct competition with younger buyers; those between 20 and 34 with young families.
“If Generation Y follows the trend of the previous generation and eschews renting and favour larger dwellings as they enter the family-forming age of life, then this will support a decade-long boom in demand for new houses and land in the new housing estates on the outskirts of Australia’s major cities and affordable major regional centres,” said Mr Zigomanis.
“Pressure is also likely to be maintained on house prices in established areas, as competition remains strong for Generation Y families looking to remain in the established areas where they have already been living and renting in smaller apartments.”
Current retirees aren’t downsizing to save money
As per the BIS Oxford Economics findings, State Street Global’s latest retirement survey highlighted the disparity between assumptions and realities of downsizing.
It found that 30 per cent of the Australian working population is planning on using downsizing or equity release instruments to make up savings shortfalls in retirement. However, only 3 per cent of actual retirees have gone down that path.
“In reality, retirees are not tapping into their home equity at the rate that younger generations expect. For one thing, smaller is not necessarily cheaper. Moving to a smaller home near an urban center may not actually reduce costs given increased real estate and cost of living expenses,” the report’s authors noted.