Aussies forced to downsize as cost of living soars

Aussies have been forced to downsize to escape rising costs, new research has found. (Source: Getty)

Aussies are being forced to downsize their homes to cope with the rising cost of living. One expert has warned both older and younger Aussies would be pressured to make the move.

A staggering 13 per cent of Aussies - or 2.6 million people - have been forced to find a more affordable property to offset the rising cost of living, according to new research by Finder.

The survey of 1,054 Aussies found 5 per cent were selling their property for a cheaper one to reduce their mortgage costs, while a further 8 per cent were moving to cheaper rentals.

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Finder head of consumer research Graham Cooke said the situation was bleak.

“Millions are having to reevaluate their living situation to alleviate financial stress,” Cooke said.

“Housing costs are generally the biggest burden on the household budget – so reducing that outlay is quickly becoming a priority.”

Young and old downsizing

CEO and co-founder of non-bank lender Bridgit, Aaron Bassin, said he expected older Aussies would need to downsize sooner, while younger Aussies facing mortgage stress would also look to move.

“In the past [older Australians] would have considered downsizing to a smaller property because their children had moved out and to cut down on home maintenance,” Bassin said.

“However, with the current economic environment, I believe this will change. And we will see a large cohort choose to make their downsize sooner than planned to free up their equity in order to support them with the rising cost of living, avoid the requirements to pay an increasing mortgage and live the lifestyle they are looking for.”

Older Aussies may be able to take advantage of financial incentives, Bassin said, including tax exemptions and superannuation benefits.

Over-55 homeowners can make tax-free contributions of up to $300,000 to their super funds from the proceeds of a sale of their home, Bassin noted. They will need to have owned it for at least 10 years.

Under new legislation, pensioners who downsize will also have a 12-month exemption to their social security asset test before they will lose or receive reduced payments.

With a number of homeowners coming off fixed-rate mortgages, Bassin also predicted some Aussies facing mortgage stress would be forced to sell, while others would look to downsize to ease costs.

“It’s more important than ever to have a plan in place if you’re looking to sell and downsize. With Australia also facing a national rental crisis, those who find their next purchase and don’t have their next property move in mind will face added stress and hidden expenses,” Bassin said.

Bridgit research found households would pay $8,300 on average in relocation costs if they didn’t have another property to move into before selling. This included temporary accommodation, moving and storage costs.

Another cost to consider is stamp duty as it can add tens of thousands of dollars when buying a new property.

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