Research shows that Australians are waiting too long to downsize, and delaying the decision is costing them their health.
The outdated idea of retirement, where one spends one’s old age in a nursing home, drinking tea and watching a movie in the afternoon, is in urgent need of renewal.
After all, data shows that we are living longer, healthier and more active lives compared to when retirement was first conceived more than a century ago, when life expectancy was just 55 for men and 58 for women.
Most homeowners aren’t even aware of the existence of a new housing option for seniors over 55 that offers everything from craft beer brewing to the latest health and wellness trends—all without having to spend their entire life savings.
In these modern communities, residents make new lifelong friendships and achieve the best physical condition of their lives. By rethinking their approach to retirement, downsizers can once again enjoy life on their own terms, free from the stress of maintaining a large, inefficient empty nest home.
Australians leave retirement planning too late
The REA Retirement Quantitative Study 2022 shows that most people between the ages of 55 and 64 are thinking about their retirement, but the demand to remain in their current home increases as people get older.
“The over-55s make up almost half of the homeownership market, but they make up less than 30% of the seller’s market,” said Fiona Wong, manager of market insights and research at REA.
“In terms of home types, most buyers aged 55 and over are looking for a detached home (67%), followed by terraced houses/terraced houses (28%) and apartments (28%).”
REA’s data shows that approximately 14% of respondents were looking to purchase a piece of land or a rural home, 7% were considering building a new home, and only 5% were considering purchasing a home in a retirement community.
“For many of our customers, it can be overwhelming to consider whether now is the right time to downsize,” said Von Slater, general manager of development, sales and marketing at Ingenia Lifestyle.
“It can be daunting to make the decision to actively put yourself first,” she says.
“And there has traditionally been a tendency among older Australians to wait for a forcing trigger, such as a medical event or the death of a partner, before considering downsizing.”
However, retiring is not ideal if you can’t do so on your own terms.
Baby Boomers’ Fears, Outdated Ideas About Retirement’s Impact on Health
It is clear that Australians need to take a more strategic approach to visualising their life after work. They need to think not only about how they want to spend their time, but also prioritise their overall health and wellbeing.
The medical community continually tells us how important it is to stay connected to your passions, have an active social life, and prioritize fitness to live longer, healthier lives.
However, current data indicate that individuals who should be prioritizing their own well-being are instead staying in outdated homes that are too large for their needs. This can potentially lead to devastating social isolation and increased risk of illness and injury.
Research data from realestate.com.au shows that living in an older, larger family home that lacks modern standards of heating, cooling, ventilation and mobility increases your risk of falls and illness as you get older.
Data from Habitat from Humanity specifically shows that poor housing has a negative impact on health and well-being.
According to analysis by Sustainability Victoria, unrenovated homes built before 1990 had an average energy rating of 1.57 stars, while unrenovated homes built after 1990 had an average rating of 3.14 stars.
New homes, on the other hand, must have a seven-star energy label, which not only makes them more comfortable but also improves the health of their occupants.
Furthermore, in many cases it is not just the quality of housing that can contribute to poor outcomes; the location of these homes, often in standard suburban areas with a mix of residents, can also reduce the opportunity for regular social interaction. This lack of social interaction can lead to loneliness, which is recognised by the government as a negative impact on health.
What’s holding baby boomers back from putting their health and well-being first?
It is understandable that many older Australians face mental and emotional obstacles when considering moving from a home they have loved for years. Financial considerations and the desire to remain in the same area are major factors influencing this decision.
In addition, decisions to downsize are further complicated by factors such as rising home prices, increasing costs of living and adult children staying at home longer as housing affordability decreases.
It’s no surprise that for many baby boomers, especially those whose nests aren’t yet empty, downsizing remains a lower priority.
Statistically, embracing the positive step of downsizing can lead to significantly improved long-term health outcomes. Photo: Eugene Hyland
What does the future of retirement look like in Australia?
Downsizing, or ‘rightsizing’, is seen as one of the solutions to Australia’s housing affordability and supply issues, as it makes larger homes available for the next generation of families.
This approach represents a more optimistic and life-affirming view of retirement, and debunks the perception that retirement is exclusively for “old people.” As the saying goes, age is just a number and you are only as old as you feel.
Downsizing and rightsizing means prioritizing what you want in life, rather than being weighed down by outdated ideas that no longer serve their purpose. If your family home no longer brings you joy, it may be time to let go and move on to a more positive living situation.
It is also clear that buyers need to be proactive and strategic and not wait until it is too late to make a decision because of an adverse health event, which is unfortunately the most common reason for moving into senior care.
Fortunately, Ms Slater noted that it is becoming a trend among some older Australians to make retirement and downsizing decisions while they are still fit and healthy.
“At Ingenia we definitely see that more and more people feel empowered to make decisions about their retirement, while they still can,” she said.
“A lot of boomers have recently put their own parents in care and it wasn’t their choice. It’s hard to reconcile and they don’t want that to happen to them, so we’re probably seeing a little bit of a shift in attitude among boomers where they want it to be their choice.”
Downsizing costs are lower than traditional purchasing methods
In recent years, legislative changes have been introduced to remove some of the financial barriers to shrinkage.
The Incentivising Pensioners to Downsize Act 2022 means that proceeds from the sale of a home will now be exempt from the assets test for age pensions for two years, rather than 12 months. This will give pensioners more time to buy, build or renovate a new home without affecting their benefit rate.
The federal government has also allowed people age 55 and older to make a one-time contribution of $300,000 to their retirement fund when they sell their primary residence.
Additionally, there are several ways to purchase real estate that many buyers are not aware of, such as leasing land, which are ideal for those considering downsizing.
With land leasing, buyers purchase a home in a designated area but lease the land on which it sits. This significantly reduces traditional transaction costs and allows them to move into a new home quickly and easily.
Furthermore, you do not have to pay any VvE contribution or stamp duty. The municipal taxes and all ongoing maintenance of the communal facilities are covered by the weekly contribution.
Land lease communities, such as Ingenia in Victoria, New South Wales and Queensland, are becoming a popular option for those over 55 to retire.
Under this plan, people purchase a new or existing home within a community and pay a weekly or biweekly fee to lease the land instead of owning it.
The communities are built in popular locations as safe residential areas with shared amenities such as clubhouses and recreational areas.
“We have 4,500 homes in 55-plus communities and we still need to develop 5,900 more because we have a tsunami of baby boomers coming in and many of them haven’t decided yet to downsize or find the right size in these communities,” she said.
“We offer independent, detached houses, gated with great communal facilities such as swimming pools, saunas, billiard rooms, cinemas – all the amenities that bring a sense of community.”
A community life as unique as you are
Contrary to some people’s outdated ideas about retirement, people who have made the decision to downsize rarely look back, only saying they wish they had done it sooner.
Ms Slater said Ingenia communities are suitable for people who want to experience a sense of community and camaraderie and live in a similar neighbourhood to home.
Justin Blumfield, general manager of residential communities at Ingenia Lifestyle, said Ingenia’s communities offer overwhelming connectedness and quality of life.
“When I talk to our residents, they often don’t talk about the house or the facilities, they talk about the friends they’ve met who are like-minded and the same age,” said Mr Blumfield.
Downsizing is about taking back time for the things that bring you joy. Photo: Eugene Hyland
“Remember, they may have previously lived in a community where all of their neighbors were an eclectic mix of people, and now they’re coming into a community of 55-plus people with people who are in a similar stage of life. That connection, I think, is one of the biggest benefits of moving into this sector as early as possible.
“I go to the clubhouses and there are art classes going on, there are bowling competitions going on. They are really vibrant places and we do everything we can to promote that. It’s all about supporting our residents to be happier and healthier in their retirement.”
It is clear that modern downsizing is very different from the old-fashioned concept of retirement homes. It is about living a full, independent life with helpful neighbors and enjoying each day with happiness, purpose and friendship.
Downsizing with pleasure means getting the most out of life.
