Downsizing: splitting your time between regional and city homes
Baby Boomers make up approximately 25% of Australia’s population, with many now faced with the decision of whether to stay in their current city homes or to explore new possibilities. Why? As a Baby Boomer, there comes a point where: the kids have flown the coop; you are no longer utilizing your home’s space but are still paying for the management of the house; you are finding it harder to manage your property; you may find that your finances indicate that to sell your property could result in a healthy injection into your cash flow.
What do you decide to do? Move into a three-bedroom apartment close to the city or a smaller freestanding property a little further out? Or perhaps you consider what an increasing number of Baby Boomers are now doing: investing in/turning regional holiday homes into more permanent living arrangements, while also having a small apartment close to the city to split time between.
The realities of city homes and regional home splits
There are clear benefits to splitting your time between a regional properties and city homes, if this is an arrangement you can afford.
- You can enjoy a lock-up lifestyle, making the most of a living arrangement in the city where you can simply leave your property for weeks or even months at a time in full knowledge that it is protected and safe, without any need for maintenance. Of course, you may have the capability to manage a property (such as gardens etc.), and this is where a regional property comes in.
- You have access to all the benefits of city living (entertainment, amenities, parks, restaurants, public transport, friends and family) while having the freedom to leave the hubbub of town any time you want.
- Having two properties, the sum of their value being equivalent to downsizing to a freestanding property within the city, means you don’t have to offload all your possessions but simply split them up.
- Peace and quiet in beautiful regional surrounds, and the lifestyle this affords you (proximity to the ocean or wineries etc.)
- The opportunity to rent out your city apartment, either long-term or short term through websites such as AirBnB, increasing your weekly income in the short term or opening up significant savings in the long term that you can use elsewhere, for instance, on travel.
- It is less risky compared to moving outright to a regional area, as you keep a property in the city and remain ‘in the market’.
If this lifestyle is something that appeals to you, remember some of the considerations associated with this lifestyle decision:
- Access to infrastructure. The greatest appeal of this decision is that you maintain access to what you love without being locked into the city. Look for properties that remain accessible to the city and that have large enough populations to drive future growth and infrastructure, rather than something too remote. If you do look at remote properties, be sure that is what you really want, and that you can afford the lower capital growth that may be associated with a remote investment.
- What will your needs be in the near-future? One of the biggest considerations to make for those looking to live regionally is whether they will have access to health care when they need it. A great benefit to this living arrangement is that you can access healthcare in the city and have a home to live in, or even a home to finally reside in once you get to an age where healthcare and an easily-manageable property are key concerns.
- Will your family have the ability to visit you? This may influence your decision, as you don’t want to feel isolated from your own children. They may be at a stage where, with one or more kids in tow, they can’t easily pack up and spend the weekend at your home.
- How will this affect your pension? Will the proceeds of your sale affect your pension asset test? Does this apply to you? Downsizers risk losing some of their age pension because home equity that is unlocked by downsizing is not exempt from the pension assets test (this may change according to announcements by the Federal Government in early 2017).
- Consider other costs associated with downsizing: stamp duty, estate agent and advertising fees, conveyancing and solicitor fees, removalists – are these costs doubled or extended if you are purchasing two properties?