08 May, 2019

My home is my castle - Household Capital


Home ownership is a strong part of Australia’s cultural identity, our way of life. That does not change when you retire…in fact, most Australian retirees prefer to continue living at home. And why not? Home is where you’ve raised your family, created memories, established yourself in a community.

Sadly, for many retirees, the need to fund 25-30 years of retirement leads them to sell the family home to downsize into a smaller home or unit, or retirement village. This often results in disruption and dislocation and doesn’t always deliver a financial advantage.

Australians want to stay at home

In 2017, researchers from Australian National University[1] polled over 2,500 Australians and found home ownership remains a national aspiration (see figure one).


The majority of Australian retirees own their own homes at retirement; despite government incentives to downsize it’s not the preferred option for most people. In fact, Australians have a strong intention to remain at home by comparative international standards (figure two).


A Productivity Commission report[1] released in 2015 found that over 60% of older Australians would strongly prefer to ‘age in place’ by staying in their own homes. Over three-quarters (76%) of over-60s told the Commission they want to see out their retirement in their own home, and 83% view home ownership as vital to maintaining independence and financial freedom as they age.

There are numerous benefits that arise from older Australians ageing in their family home:

  • The familiar environment – research has shown people who age at home are happier and healthier
  • Social networks – maintaining your social networks improves physical and mental health for older people who stay in their own home
  • Adapt – you can modify your own environment to suit your changing needs.

More recently, an article published by ABCNews interviewed pensioners who, in the words of one, were ‘asset rich but income poor’.

In other words, their homes are valuable, but retirement funding inadequate. As those interviewed reinforced, not all retirees want to downsize and most want to stay in their own community and maintain their social connections.

The downside to downsizing

Selling the family home, moving to a lower-priced property and using the differential to fund retirement is often suggested as a major opportunity to improve access to home equity. Despite that, there are a number of downsides to consider:

  • Costs – when you factor in legal and transaction costs, stamp duty and moving expenses, the realised value of downsizing is eroded.
  • Availability – in many areas, there is limited availability of lower-priced accommodation, meaning that retirees may need to leave their community and social support structures to capture meaningful proceeds from downsizing.
  • Suitability – downsizing options built on a single level are not always readily available; a new residence may mean stairs that challenge old hips and knees.
  • Community – many people want to remain in their community, near their family and friends, with access to the services they frequently use. These may include medical and allied health practitioners, clubs and groups, the library and even a favourite café.
  • Centrelink impact – importantly, despite recent downsizing concessions for retirees, tax and transfer systems result in assets released from home equity downsizing having a potentially adverse impact on assets and income tests for access to the Age Pension.
  • Complex and disruptive – despite government incentives for older Australians to downsize, it’s not that easy.

The Productivity Commission report found that age-specific housing such as retirement villages are very expensive and limited in number and location. On top of that, retirement village fee structures are regulated in a way that makes them overly complex and difficult to compare.


Although most Australians want to age at home (figure three), longer lives combined with retirement funding inadequacy may lead to retirees being forced to prematurely downsize or relocate to retirement homes with significant disruption and financial disadvantage.

More importantly, in-home poverty, forced downsizing or premature relocation to aged care may undermine the lifestyle and wellbeing of retirees and the economic burden of retirement. New approaches that can help Australians remain at home and meet the challenges of both longevity and retirement funding adequacy will play an important part of meeting the needs of many older Australians.

[1] Housing Decisions of Older Australians, Productivity Commission, 2015

[2] ANU poll of Attitudes to Housing Affordability, March 2017