06.29.2021 Lifestyle

How Downsizers Are Reshaping The Eastern Suburbs Property Market

How Downsizers Are Reshaping The Eastern Suburbs Property Market

Downsizers a real force in the eastern suburbs property market.

Now they’re beginning to change it in some important ways.

Downsizers have been active in the eastern suburbs property market for some time. However, they’ve never been as much of a force as they are right now.

In some market segments, downsizers have become the dominant buyer group. And that’s having real implications for which properties are in the highest demand, as well as the way properties are designed, marketed and sold.

We take a look at what’s behind this phenomenon and how it’s reshaping our local market.

The current state of play

If you focused on the headlines you’d think this was a runaway market and that this was a bad time to be a buyer. But that doesn’t tell the full story at all.

It’s true that Sydney property prices have been heading rapidly upwards over the first part of 2021. In fact, the median Sydney dwelling price lifted 12.5% in the five months to 31 May, according to CoreLogic data. In our local area, some suburbs and property types have grown further still.

For instance, according to realestate.com.au, the median house price in Bondi Beach rose 21.5% in just four months to 30 April.

How a rising market helps downsizers

However, not all parts of the market are acting in unison. Most obviously, the housing market has decoupled from the apartment market. Unit prices lifted 6.5% in the year to 31 May, at the same time as house prices rose 15.1%, according to CoreLogic.

Given that many, if not most, downsizers are selling the family home and moving into an apartment or townhouse, that’s great news because it means the gap between the property they’re selling and the one they’re buying may have widened.

For example, if someone at the start of the year was selling a family home worth $4 million and downsizing into an apartment worth $2 million, the gap between the two would obviously be $2 million, minus any expenses such as stamp duty.

Today, if both those properties rose in line with the Sydney median, the family home would be worth $4,604,000 and the apartment $2,130,000 – a gap of $2,474,000. That’s almost half a million more to devote to retirement.

Of course, the Sydney market is more nuanced than that and these are just medians. But it does give you some idea of how a rising market can be a good time to downsize.

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More downsizers can boost their super

Another factor that has helped many people make the decision to downsize has been the federal government scheme that lets people contribute up to $300,000 from the sale of their home into their superannuation when they downsize. Previously, you had to be 65 or over to take advantage of the scheme. In the most recent budget, Treasurer Josh Frydenberg announced that this would be extended to anyone over 60.

Better yet, the $300,000 threshold applies to individuals rather than couples or households. That means a couple could legitimately contribute as much as $600,000 from the sale of their home into their super when they downsize – potentially a massive boost to the retirement nest egg.

What downsizers want

As we’ve mentioned previously, downsizers in today’s market often have specific wants when it comes to any property they’re purchasing. Usually, that begins with level access, which means that garden apartments and apartments in buildings with lift access are in particularly strong demand. So are low maintenance houses that have few stairs, a lift, or the potential to install a lift.

They also want to be close to the action and to good transport links, so we’re seeing suburbs that offer this – such as Paddington, Woollahra, Surry Hills and Potts Point – are in high demand.

Downsizers also often want space and lots of it – sometimes as many as three or four bedrooms. After all, it can be difficult leaving a sizable family home and moving into small quarters. There’s also always the chance that the grandkids or other family members will want to spend the weekend.

What this means for the market

As more people begin to downsize, property developers and owners are beginning to account for this in their planning.

In fact, we’ve recently seen body corporates in some older apartment buildings in our area retrofitting lifts to make them more appealing to downsizers. We’re also seeing developers specifically designing projects with downsizers in mind – which usually means seamless access from basement parking to the door of each apartment. For example, 2/8A Arnold Street Queens Park is a four-level property, but with lift access to all levels, it would happily suit a downsizer.

Going forward, we believe there will be a massive market in boutique developments that can offer oversized apartments that meet the requirements of discerning downsizers.

Whichever way you look at it, we believe this should be one of the segments that outperforms both the short- and long-term averages for property values in Sydney’s Eastern Suburbs.

Want more?

If you’d like advice on downsizing in today’s market, get in touch.