Downsizers in the Eastern Suburbs
The greatest significant wealth creation event in the history of the Australian real estate industry was the latest property boom. More than seven out of ten Sydney areas now have a median property price of more than $1 million. 16 percent of residential properties in Sydney are valued at more than $2 million. It would take a significant decline to wipe out last year’s gains.
Here are a few things to keep in mind.
- The median property price in Bellevue Hill, in Sydney’s Eastern Suburbs, increased by $650,000 from $6.7 million to $7.35 million.
- The median property price in Bronte increased by $620,000, from $4.43 million to $5.05 million.
- All houses in North Bondi have increased in value by more than $500,000.
- The median price in Redfern increased by $300,000, from $1.55 million to $1.85 million.
Our senior population may be house rich, but some are cash poor, since they are unable to access the growth in their home equity due to loan issues and they are left with the option of downsizing.
Downsizers in the Eastern Suburbs, on the other hand, face the challenge of locating a large unit, in the perfect location, near shops, at an affordable price that will allow them to pay for stamp duty, agent fees, and save money to enjoy their retirement or aid the kids.
Let us put this into numerical terms. A standard four-bedroom home in Dover Heights or nearby suburbs is worth roughly $7 million, less a 1.5 percent selling charge of $105,000, legal fees, and other selling expenses such as cleaning, maintenance and styling, which could cost over $20,000.
Let’s take a look at the purchasing scenario, presuming you have discovered a decent apartment at a reasonable price. You will pay 1.5 percent to 2% of the purchase cost if you use the expertise of a buyer’s agent. It’s fine if you’re busy working and making a good living. However, it comes at a large cost if you use your equity or a tax-free capital gain. The buying charge on a six-million-dollar acquisition is $90,000 and up; add $356,952 for stamp duty, legal fees, relocating, and other costs, plus $10,000.
The more serious problem that downsizers face is the scarcity of bigger apartments on the market. As previously noted, new houses are selling for more than the typical home sale price.
The government could surely consider programs that make it easier for downsizers. We devote so much time and energy to first-time home buyers and policies that assist them in entering the market, which is critical, but we overlook the other end of the spectrum.
We simply do not make it easy for folks to efficiently downsize.
Despite the high expense of downsizing today, according to a study by Finder, one in every eight Australians (or 12%) plans to downsize their houses in the coming year in order to access the wealth they have accumulated.
According to the research, nearly 5% of Australians want to downsize to less expensive housing to free up equity, just over 4% of households want to downsize because they don’t require as much room as they used to, and the remaining 3% of households want to downsize to save money.
For decades, downsizers have aspired to sell the family house, free up some equity, and assist their children in purchasing their own home.
It’s only a matter of crunching the figures to see how it might work in different situations.