Downsizers have been a factor in the Lower North Shore property market for some time but lately, we’ve noticed they’ve recently become a real driving force. We look at why they’re so active right now even in the midst of a long lockdown.
A rising market suits downsizing
This has been a very strong year for the Sydney property market, despite the uncertainty caused by the Delta variant of COVID-19.
The median dwelling price across our city has risen 17.7% since the start of the year, according to CoreLogic. That’s an incredible result and one we’re really seeing play out locally here on the Lower North Shore, where quality properties are still in demand and competition remains fierce, even in lockdown.
One of the general rules of real estate is that a rising market favours downsizers, especially where the home they’re buying is less expensive than the one they’re selling. That’s because, as prices go up, the more expensive property’s value will rise more in real terms than the less expensive property.
For instance, say your family home was worth $4 million at the start of 2021 and you were thinking of selling it and buying an apartment worth $2.5 million. The difference between the two properties would be $1.5 million, less any stamp duty, agent’s fees and other costs. However, if both properties have risen in value over 2021 in line with the Sydney average of 17.7%, your family home would now be worth $4.708 million, while the apartment would be worth $2,942,500. That’s a gap of $1.765 - or $265,000 more in your pocket.
House prices are outpacing apartment prices
For many people, the news is better still. That’s because the previous example assumed that the market rises uniformly - and we all know it doesn’t. Different property types rise at different paces depending on who’s buying and what’s driving the market.
One of the real trends playing out at the moment is that the market in houses is rising much faster than the apartment market. This is partly because of very low interest rates, but also because many families have been spending a lot more time at home. They’ve often decided they need more space and are now looking to take a step up the ladder.
So even though the median dwelling price may have risen 17.7%, this trend has driven the median house price up 20.9%. Meanwhile, the median apartment price has risen at a more modest pace of 10.0%.
Using the same examples above, the house that was worth $4 million at the start of the year would actually be worth $4,836,000 while the $2.5 million apartment would be worth $2.75 million.
In other words, if you were looking to downsize now, based on these numbers you’d have more than half a million dollars left over than you would have had at the start of the year.
The government is making it more attractive to downsize
Not only that, but the government is actively making it more attractive to sell the family home and dedicate the difference in price towards your retirement income.
They’re doing this by allowing anyone over 60 to dedicate up to $300,000 from the proceeds of the sale of your home into your super. That’s per person. So a couple who sell the family home and downsize may legitimately contribute up to $600,000 from the sale into super and receive all the tax benefits that brings. The only catch is that you need to have owned the home you’re selling for at least 10 years.
The main challenge with downsizing: stock
The main challenge for downsizers right now are not the general market conditions, it’s the lack of available stock.
As we get older, factors such as level access, and proximity to shops, cafes and public transport become more important. Given our area has so many attractive village-like centres - such as Mosman, Cremorne, Cammeray and Neutral Bay - the lower North Shore is prime downsizer territory.
The size of the property matters for downsizers too. Many have grown used to the privacy of a family home and don’t want to compromise their standard of living too much. That means three and even four-bedroom apartments, townhouses and villas are in high demand. They also often expect higher-end, more quality fittings than many other buyers. That’s why the premium end of the apartment and townhouse market is now dominated by downsizers.
The problem is that there are still not enough properties available to meet these needs. Properties that fit the bill are often hotly contested and it pays to act decisively when you find something you like.
For this reason, as more locals near retirement age, we’re likely to see far more developers focus on delivering properties specifically targeted at downsizers.
Our recent sales
Even through the current lockdown, we’ve been continuing to sell many properties that have attracted strong interest from downsizers.
40/17 Raglan Street, Mosman. A waterfront three-bedroom, two-bathroom apartment boasting world-class water views. This was sold in just 6 days on the market, showing just how popular these types of properties are.
If you’d like to know more about the current market or receive a free appraisal of your home please feel free to get in touch.