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AUSTRALIANS believe in the phrase “safe as houses” so much that they will spend most of their working lives buying and upgrading the family home.

With most of our resources channelled into this endeavour, some can proudly wave the ownership banner upon retirement as the greatest retirement asset acquired.

According to a Productivity Commission research paper, households with people aged 55 years and over hold almost 59 per cent of the total home equity in Australia.

However, when it comes to using the wealth accumulated through the family home, it is often the last asset considered.

An analysis of Centrelink records between 1999 and 2007 found that pensioners who passed away left behind residual wealth equal to about 90 per cent of the amount recorded when they first retired. Most of this wealth was in the family home and left unused as a source of retirement funding.

Most of this wealth that is created in houses is simply capital growth that has occurred over time.  Because we see our houses rise in value, it has been found that older Australians view their family home as a precautionary saving measure or a potential bequest.

So should you consider selling the family home and downsize as part of your retirement planning?

The longer the sale of the family home is put off, the higher are the costs of renovations that are needed to get the property ready for sale.

Finding suitable accommodation close to necessary amenities, such as hospitals, becomes increasingly difficult as property prices in these areas generally increase more than other areas.

This makes the idea of extracting equity from the family home difficult.

Apart from the financial impact of delaying selling the family home, there are also physical and emotional issues.

Australians prefer to age in their existing family home but, as they do, mobility becomes a bigger issue.

A reduction in the age pension payment can also be a reason for the reluctance to downsize.

Under the current assets test, you will lose $1.50 for every $1000 above the tHicks Real Estateshold.

In terms of return, this is about 3.9 per cent a year.

However, the equity that is released, when invested properly, may be able to yield a higher long-term average and, more importantly, would also provide a buffer for emergencies — something that the retention of the family home cannot easily provide. One possible solution is to consider downsizing before retirement. It is a sensible idea to plan how we are going to approach retirement.

Should you include your family home in your retirement plan

For example, when there is still an income, renovating the property prior to a sale may well be easier. The funds that had been freed from this exercise could either allow us the option of working longer, or investing to produce in the long term higher retirement savings.

An Association of Superannuation Funds of Australia survey found that for the June quarter the average annual expenses for a modest and comfortable lifestyle were $34,216 for singles and $59,160 for couples.

As a guide, assuming 20 years in retirement, investing in a conservative investment option and including the government age pension, you need about $430,000 for a modest retirement and slightly under $950,000 for a comfortable one.

Houses are safe. We invest in them to help us retire. But it could be a pointless exercise if we continue to hold on to them in retirement.

As the population ages, perhaps there should be more done in terms of providing suitable housing for retirees.

Until then, we may have to consider changing our perception and be willing to put our investment to good use.  What do you think?  What is your strategy leading into retirement?

We would like to acknowledge Elson Goh is a senior lecturer at the School of Economics and Finance at Curtin University, for some of this research.

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Hicks Real Estate is a Brisbane based, full-service real estate agency supporting buyers and sell as well as renters and property investors. With almost 20 years experience in the local market, we are the real estate experts you can rely upon.