As median house prices continue to climb across most capital cities, many asset-rich cash-poor seniors are missing out on an opportunity to build on their existing home equity and improve their living standards.
The Australian Bureau of Statistics’ latest residential property price index revealed median house prices rose across most capital cities in the 12 months to September 2015, with the highest growth in Sydney (19.9 per cent), Melbourne (9.9 per cent), Canberra (4 per cent) and Brisbane (3.8 per cent).
Retirement finance expert and author Rachel Lane said senior homeowners could boost their cash reserves by tens or hundreds of thousands of dollars by selling while prices are high and moving into more affordable accommodation.
“While housing affordability is generally considered a young person’s issue restricting entry to the market, it is also a major problem for those that do own a home but rely on a low weekly income,” Ms Lane said.
“The Australian Government Productivity Commission’s recent report Housing Decisions of Older Australians found more than 90 per cent of homeowner Age Pension recipients currently under the ASFA threshold for modest retirement standards could reach that benchmark over the rest of their lives by using their home equity.
“The report also suggested households aged 65 to 74 years had on average $480,000 in home equity, which compared to the cost of a more affordable home in the vicinity of $200,000-$300,000 represents a significant gap of potential cash reserve.”
According to Ms Lane, there is great confusion amongst many people about the types of affordable housing available.
“Senior homeowners looking to downsize needn’t be competing in the private market against homeowners and investors, which is a common fear, as there are a variety of traditional and new home options to suit,” Ms Lane said.
“Lifestyle-focused manufactured home estates for example are one of the newest catering to this specific market.
“While the homes on offer are of an increasingly high quality, the entry price point is kept low since residents lease, rather than own the land, with weekly fees in the $120-$160 range. This pricing model eliminates the need to pay stamp duty, entry and exit fees and in some cases, the resident is then eligible for rent assistance.
“One such operator – Active Lifestyle Estates – has 21 communities across New South Wales and recently expanded into Queensland.
“For example, in Queensland’s Logan City, the median house price at Active Lifestyle Estates Chambers Pines is $210,000, 63 per cent lower than the $572,000 median price point for the surrounding Chambers Flat area.
“Likewise in western Sydney, the quarterly median house price in areas like Windsor ($598,000) and Blacktown ($661,000) are double the $300,000 starting price point for the nearby Active Lifestyle Estates Stoney Creek community.
“I would urge seniors to pay close attention to median house prices in their area and affordable housing price points like these to get a better sense of the type of cash reserves they might be able to access.”