Should older Australians downsize their property?

Older Australians face the dilemma of not being confident about their retirement outcomes, but are among the wealthiest retirees in the world due to a large proportion of their wealth being tied up in the family home, new research has revealed.

Results collated by Household Capital show that only one in four Australians is very confident they have sufficient funding to live well in retirement.

The survey revealed that many Australians who did not touch their superannuation during the COVID-19 early access to super scheme are still unlikely to have a large enough portion of their wealth in superannuation to comfortably retire.

However, much of the financial strain felt by older Australians is due to wanting to live in the family home, with 73 per cent of respondents saying they did not want to downsize.

Dr Joshua Funder, chief executive officer of Household Capital, said the Household Capital Retirement Outcomes survey clearly shows that the family home is not just the preferred retirement housing, but also by far the biggest store of retirement savings.

“Older Australians are among the wealthiest in the world,” Dr Funder said.

“They have been great investors and savers, diligently accumulating capital in their home. And almost everyone is aware of the role home equity can play in helping to fund their retirement.” 

The survey showed the median home value is 4.5 times the value of their superannuation balance (with other assets making up only 3 percent of their wealth).

City dwelling retirees hold an even greater proportion of their wealth in their home property; metropolitan areas showed a higher variance, and Sydney residents have homes which are 6.2 times their superannuation balance. 

In total, 82 per cent of the average person’s wealth is held in capital values of their home rather than in a superannuation fund or liquid assets.