There comes a point in most of our lives when a large, family home is no longer the right fit for the lifestyle we lead. Knowing when it’s time to say goodbye to that sentimental property, however, can be a difficult and emotional decision.
“Downsizing is definitely a tricky topic to broach with property owners,” says Schalk van der Merwe, franchisee for the Rawson Properties Helderberg Group. “It can feel very final – closing a chapter of your life – but delaying out of sentiment can also be a risky choice.”
Step 1: Acknowledge the risk of downscaling too late
According to Van der Merwe, maintenance and upkeep can be a struggle for older homeowners. This not only diminishes their quality of life before downscaling, but can also significantly decrease the eventual profits on their sale.
Poor maintenance isn’t the only way profits can be affected, however. Van der Merwe explains that large and luxury properties typically experience slower growth than the more affordable market segments, particularly in our current economic climate. This is slowly, but surely, eroding the price gap between family homes and their increasingly-expensive, compact counterparts.
“People who are planning on using the profits from the sale of their family home to purchase a smaller property and also support them during retirement should definitely make a point of moving sooner rather than later,” he says. “The longer they delay, the lower their profit margin is likely to be, and the smaller their retirement nest egg will be as a result.”
Step 2: Check in with reality
The increasing value discrepancy between luxury homes and lock-up-and-go properties can be a stumbling block for those exploring their downscaling options.
“We do see some homeowners in denial over the financial side of downscaling,” says Van der Merwe, “as their expectations on how much they’ll be able to afford doesn’t always match reality. To avoid this kind of situation, we always urge people to consult with experienced real estate agents in their area to get the full picture of what’s really happening in the market before making any decisions.”
A good realtor should be able to provide the following:
Growth trends in your suburb over the last 10 years
Short to medium market forecasts including potential interest rate and inflation hikes
Opportunity costs for selling vs holding on to your property
Proof of current market conditions and information on competing properties
Sale and purchase cost estimates for budget purposes
Step 3: Confirm your financial plan
Once you have a good idea of how much you’ll be able to sell for, Van der Merwe suggests consulting your financial advisor before setting a budget for your next property purchase.
“Retirement planning is essential, and you need to make sure that you’re covered in that respect,” he says. “You don’t want to overspend on a compact property and find yourself in financial difficulties a few years down the line.”
Step 4: Plan a fulfilling future
Downscaling isn’t just about selling well and buying more affordably. It’s also about finding a home that fulfils your needs during the next chapter of your life.
Van der Merwe urges buyers not to base their property decisions solely on things like proximity to children, who could easily move on later in life, leaving their elderly parents in an area that no longer provides social stimulation.
“Your family is important, but you also need access to shops, friends, social clubs and other activities. Make sure your new home and neighbourhood offer more than just easy access to the grandkids,” he says.
“Downscaling may be an emotional time,” he continues, “but it should also be fulfilling – it’s your chance to focus on you. Find a home that gives you the freedom to enjoy your life with more stimulation and fewer responsibilities. It’s not something to fear, but rather to look forward to. If you plan well and keep track of your options, it can be the most amazing and positive change.”