Downsizing a red hot 2017 Federal Budget issue

Downsizing a red hot 2017 Federal Budget issue
Downsizing a red hot 2017 Federal Budget issue

Who'd have thought downsizing and the issue of empty bedrooms in suburbia will soon become a red hot 2017 Federal Budget issue.

Its because the government is looking at proposals to encourage ageing homeowners to downsize to free up more affordable stock for young families.

The likely May budget package was first floated two years ago by Scott Morrison when he was social services minister.

It is hoped breaking down a few barriers will encourage older Australians to down­size homes, thereby releasing more stock to the market and also unlocking billions in capital.

The government has advice from the Productivity Commission that estimates 15 per cent of older Australians want to move.

But seemingly not until the government addresses one of the big impediments on why they stay in large homes long after their children have left. 

After selling their home the elderly can lose some of their part-pensions under the asset test. 

The latest thinking is that some of the windfall sale proceeds pocketed after selling could be quarantined from the assets test.

There's also prospective exemptions coming to the $1.6 million cap on tax-free super retirement funds, and the $100,000 annual cap on non-concessional contributions.

Research from the Centre for Independent Studies (CIS), says some 80 per cent of retirees own their home with the overwhelming majority having no mortgage, so their prospect of surplus funds is real.

The CIS estimate the amazing value of pensioner home equity at $625bn - which is around a third of the countries' superannuation savings pool. 

Scott Morrison won't force older Australians to move house, given the emotional and ­financial investment in family homes, but incentives could free up an estimated 50,000 properties a year.

His focus will be on removing disincentives along with measures to boost the supply of enticing over-55s housing.

Obviously there's more than just these impediments as I recently noted stamp duty is a barrier, but that is a matter for the states since stamp duty didn't disappear after Canberra introduced the gst.

It will be interesting whether the package addresses the big difference in house prices - and prospect of easier surpluses - across Australia. CoreLogic puts Sydney's median house price at $895,000, compared with $680,000 in Melbourne, $635,000 in Canberra, $530,000 in Darwin, $520,000 in Brisbane, $500,000 in Perth, $455,000 in Adelaide and $383,000 in Hobart.

The Property Council of Australia calculates there are 530,000 seniors who receive the full-rate age pension, who are aged over 75 and own their homes exempt from the asset test. If they sell, these seniors lose $3 a fortnight for every $1000 of assets over the asset test threshold, which is $250,000 for singles and $375,000 for couples, and higher for non-home owners.

Exempting $100,000 of the house sale proceeds from the asset test would encourage about 17,000 house sales annually, the PCA suggested, rising to 50,000 houses if the exemption was $200,000.

 This article first appeared in the Daily Telegraph.

 

 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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Budget Downsizing

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