Five things to consider before downsizing during a recession

Thinking about selling up the family home for something smaller? Here are five things to consider before selling your home during a recession.

1. What’s the market like where you are?

Make sure you have a realistic picture of what price you could get for your home – and how long it may take to sell. According to property analytics and risk management firm CoreLogic, home prices dropped by 0.8% in the June quarter, with higher-value properties in Sydney and Melbourne the worst hit (3).

Homebuyers are also taking their time to buy, although sales increased in June as the first lockdown restrictions eased (4).

What’s more, with fewer international students looking for rentals and no overseas travellers filling up Airbnb properties, there’s a glut of rentals – especially in the bigger cities. So more people may decide to sell their investment properties, further impacting housing prices.

Of course, the housing market will vary depending where you’re located. For example, in the June quarter, housing prices fell in the State capital cities but rose in Canberra and Darwin.5

It’s impossible to accurately predict the ongoing impact of COVID-19 on the economy. So keep your eye on market reports – and talk to a real estate agent about your prospects.

2. Where to next?

Falling housing prices could mean you get less for your home – but your new place could be cheaper too. While it’s normal to focus on price in a recession, consider your lifestyle too. Are you hoping to slow down and move to a quieter neighbourhood – or out of a city altogether? Would you prefer a city apartment that’s close to shops, entertainment and restaurants? Or is your heart set on the community life of a retirement village?

While downsizing may mean a smaller home, be sure you choose somewhere with enough storage space – and a spare room if you’re expecting family or guests to stay occasionally. If you enjoy gardening, choose somewhere that allows you to get your hands into the earth – even if it’s a balcony with pots or window boxes.

It’s also wise to think about how needs could evolve as you age. Think about the services you may need, like medical centres, libraries and public transport. And consider the layout of your home, and whether you should avoid things like stairs or split levels.

3. Is your home inspection ready?

If you do decide to sell up, the next step is to get your property inspection-ready.

Most people cut back on discretionary spending during a recession – either because they’re not cashed up now or worried about running low down the track. So doing home repairs now could make your property more attractive to potential buyers who aren’t keen to spend on redecorating and repairs.

Give your home a fresh coat of paint, repair damage to roofing or floor coverings, and deal with any plumbing issues. Take care of those little repairs too – like leaky taps and toilets, stuck windows or missing handles on cupboards.

4. Thought about making a downsizer contribution?

Worried your super isn’t all you hoped it would be? Under laws introduced in July 2018, if you’re 65 or more, you can contribute up to $300,000 from the sale of your home into your super – without the usual caps, or work test, age limits or $1.6 million restrictions applying.

If you’re in a couple, you can each contribute to your own super funds – potentially boosting your collective super by $600,000 (6).

5. Have you got your budget sorted?

If you’re retiring, you’re likely to be on a tighter budget than when you were working. So make sure your super is appropriately invested for your age, goals and appetite for risk.

We can help you make the most of money and help you budget as you approach retirement – and help make your downsizing journey a successful and happy one.

As your wealth grows, you may be considering a legacy approach to your giving. Verve Group can help you consider your options in the context of your overall financial goals and can help you put cost-effective plans in place.

Did you know we offer free initial financial planning consultations? There's no pressure to continue afterwards, so you've got nothing to lose!

Find out more on our website or give us a call on (08) 8120 4877.

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1 ABS, 5206.0 – Australian National Accounts: National Income, Expenditure and Product, Mar 2020.

2 Philip Lasker, ‘Unemployment passes two-decade high as job applicants ‘inundate’ employers,’ ABC online, 18 July 2020

3 CoreLogic, Monthly Housing & Economic Chart Pack – Our Insights. Your Story July 2020.

4 CoreLogic, Monthly Housing & Economic Chart Pack – Our Insights. Your Story July 2020.

5 CoreLogic, Monthly Housing & Economic Chart Pack – Our Insights. Your Story July 2020.

6 ATO, Downsizing contributions into superannuation, June 2020.