Stamp duty is one of the major impediments for retirees trying to downsize from their big suburban homes and free up housing stock for the next generation, according to a survey of 800 seniors by LJ Hooker and property portal Downsizing.com.au.
Of those surveyed, a quarter (25%) said the cost associated with moving house was the biggest barrier to downsizing while 30% said paying no stamp duty or a reduced rate of stamp duty would incentivise them to downsize.
While some states like Victoria offer full stamp duty exemptions and concessions up to a certain threshold for pensioners, in NSW where housing is most expensive, stamp duty can add $40,000 to the cost of a median-priced house.
The LJ Hooker survey was carried out prior to the May Federal Budget, in which it was announced that, from 1 July next year*, those aged 65 and over will be able to downsize their family home and place proceeds up to $300,000 each into their superannuation fund.
"Housing affordability hinges on supply, and the Federal Budget announced in May dangled the carrot for our aged community to sell their redundant family homes with less fear of penalty," said LJ Hooker head of research Mathew Tiller.
"But federalism requires a dual-tier approach to housing affordability and state stamp duty remains the biggest roadblock to increasing supply in the marketplace," Mr Tiller said.
Melbourne retiree Steve Crowley took advantage of stamp duty concessions available in Victoria for off-the-plan purchasers to acquire an apartment in The Maison, a high-end development in Toorak.
He and his wife downsized from a family home in Canterbury after their nest emptied. They paid cash for their new apartment.
Mr Crowley said many of his peers were looking to downsize, but stamp duty remained a big impediment as well as a lack of suitable opportunities, a factor also identified in the LJ Hooker survey.
"A lot of people are contemplating doing what we did, but there's not a lot of nice places of high quality that you can lock and leave and that are close to shops," he said.
Amanda Graham, co-CEO of Downsizing.com.au, said the survey was compelling evidence about the barrier that stamp duty posed to Australians aged over 50 who want to move to more affordable and suitable accommodation.
"It's clear that the home owners using our retirement property website are looking for specific stamp duty reductions and incentives so they can downsize out of the family home and into more suitable accommodation specifically designed for their needs.
"The survey shows they are also clearly searching for properties designed to suit people aged over 50, in locations near where they are currently living and close to public transport and shops."
The survey found the other factors discouraging downsizing were simply not being able to find a suitable property to downsize to (identified by 35% of respondents), the current superannuation caps and pension asset tests (15%) and because property had become too expensive (15%).
* Note, this proposal is yet to be legislated so not yet set in stone.
This article was originally published by the Australian Financial Review on 11 July 2017. It represents the views of the author only and does not necessarily reflect the views of AMP.
Because many people can no longer put as much into super, an investment bond may provide another way to save for retirement.