Property experts say the scheme could make better use of existing housing stock by allowing retirees to move on from houses that are too big for their needs. Photo: Nic Walker
Financial advisors an
d property industry figures have cautiously welcomed a budget initiative to entice seniors to sell the family home and downsize, but warned its administrative complexity could turn people away.
The three-year, $127 million trial announced as part of Wayne Swan’s pre-election budget aims to allay concerns among seniors that cashing in the family home and downgrading could reduce or wipe out their pension.
Retirees will be able to invest up to 80 per cent of the gain from downsizing, up to a limit of $200,000, in a special account. The money will be exempt for 10 years from the age pension means test, however it only applies if they have owned the home at least 25 years.
Ken Raiss says the scheme was one of the more positive measures the budget offered. But he was concerned the need to set up a special account and to have owned the home for more than 25 years, and questions over what would happen after ten years could take the shine off a good idea.
“Sometimes a good idea is drowned by administrative compliance requirements,” Raiss says. “I’m hoping that isn’t the case here.”
One of the budget’s best moves
Peter Bushby, president of the Real Estate Institute of Australia, says it is a worthy trial.
“It has the potential to create better utilisation of existing housing stock,” Bushby says. “I’m sure there are a lot of older people sitting in houses that are much bigger than they need, but frightened to sell because of the implications against their pensions.”
It was one of the “few positive moves” in the budget overall, he said. The REIA has long called for ongoing support for first home buyers as the home-buying grants have been increasingly geared towards buyers of new homes. And market dampeners like stamp duty are also a running concern.
“I don’t think they’re keen on anything too far away from the norm at the moment,” Bushby says.
Charles Tarbey, chairman of Century21 Australia, says it is a positive step but measures were needed to boost construction of homes that retirees would like to live in. A tight lending environment and planning red tape were making it hard for builders to create desirable homes like villas.
“People are holding onto their properties because there is nowhere to go,” Tarbey says. “The major issue which hasn’t been addressed by state or federal governments is the way they can activate developers or investors to go out and take the risk of building properties that people such as these retirees would want to move into. That’s the biggest issue we face.”
Article sourced from: BRW