Planning to Downsize Your Home
When clients are outlining their funding plans for retirement, downsizing their home to release some funds is frequently part of their future strategy. Often though, by the time they are ready to make that move they do not want to leave their local friends and networks and simply want a property in a similar location that is perhaps more modern and easy-care. However, they are not alone in that search and the perceived cash release is often not there. Having a plan and building up some wealth over and above your home equity helps build greater choices down the track.
Planning to downsize your home? Not so fast
Story by Susan Edmunds Stuff 10.10.2024 Copyright © 2024, Radio New Zealand
Many New Zealanders plan to downsize from big family homes when they reach retirement – but it sometimes proves harder than expected.
It’s an issue that has been highlighted by the Retirement Commission, which said there was evidence people found it difficult to downsize due to a lack of appropriate properties.
Corelogic chief economist Kelvin Davidson said by comparing four-bedroom houses with two-bedroom townhouses it was possible to see which regions might, in a broad sense, be most difficult in which to downsize.
West Coast had the fewest two-bedroom homes compared to four-bedroom houses. That was followed by Waikato, where the number of two-bedroom townhouses was only 16 percent of the number of four-bedroom properties.
Bay of Plenty was third with 17 percent.
At the other end of the scale was Canterbury where there were more than 40 percent the number of two-bedroom houses compared to four-bedroom. Hawke’s Bay was second with 38 percent and Southland third with 36 percent.
Davidson said the bigger regions tended to have a more diverse housing stock and be easier to downsize in.
“Waikato and Bay of Plenty are at the other end of the spectrum, they are big regions with big centres but there is always an exception to the rule… Waikato has a large share of lifestyle properties and fancy suburbs with bigger sections.”
“We’ve seen clients who planned to sell a $1.5m four-bedroom home. They wanted to buy a smaller apartment. They bought a smaller apartment … but it still cost them $1.3m. Because they wanted a higher quality apartment.”
Some people expected to move to a smaller town, he said, but that could be hard if they did not want to leave families, grandchildren or friends.
“A lot of people haven’t thought about the practicalities and trade-offs of how that works. That’s why I always encourage investors to think about building wealth outside the family home. Because then you don’t have to make the same tradeoffs.”