You’re probably wondering what I’m talking about when I ask the question, “to downsize or upsize?”
Yes – I’m talking about your home.
No doubt most of us have asked ourselves these questions at various times, “Do I need a bigger home?”, or, “Do I really need this much space anymore?”
To put this into some sort of perspective, the average size of a new home being built in Australia is 214 square metres.
This is large! the first home I bought in the early 1980s was 90 square metres, which is still twice the size of the average new home being built in Hong Kong today – only 45 square metres!
We currently have the largest ‘average’-sized homes in the world.
Based on our population, and the size of the homes we are constructing, Australians require 960 square feet of floor space per-person as opposed to a person living in Hong Kong who only requires 161 square feet.
Obviously Australians must like a larger amount of personal space (which is probably why we aren’t good in queues and traffic jams!)
So if our homes are amongst the largest in the world, on average, why are some people in retirement – or when all their children have left home – asking the first question; Do I need a bigger home? and not the other.
According to a 2014 Merrill Lynch study, every 3 in 10 retirees upsized their homes upon reaching retirement, and the reasons for these moves to larger (and more expensive homes) are varied but include:
So that children and grandchildren can come and stay.
Caring and accommodating for an older parent.
Treating themselves to the home in the location where they have always wanted to live.
Thinking of it as an investment – looking for a higher resale value later into retirement.
It is not means tested for the purposes of the age pension.
I am certainly not going to argue the pros and cons of each of these reasons in this blog but I am going to ask the very simple question, “Do you really need a larger home with more space, especially in retirement?”
Have you accumulated so much stuff over the years that you need to maintain a house much larger than what you need just to store your collected ‘memorabilia’. Read PK’s blog post on this issue and accommodate your children and grandchildren who may, or may not, visit for more than a few hours?
As PK and I have often stated – a bigger and more expensive home will be costly to maintain and will exhaust more of your hard earned retirement funds on a yearly basis.
Retirees should always have this first and foremost at the front of their mind when they are trying to decide if they should sell their home to purchase something larger.
I believe you do not need 214 square metres to make a home comfortable or livable in retirement.
How many bathrooms do you really need; do you need the extra living area – I have two and one is in pristine condition it is just an extra space to collect dust; do you need a media room in addition to the living room, a rumpus room, do you need the extra powder room, the list of extras is endless.
Unless you have sufficient funds a large more expensive home in retirement can be a millstone around your neck. Tying up and exhausting your hard earned funds in a way, I am sure most of you did not envisage.
If you still decide that this is what you would like to do in your retirement, please do talk to someone and discuss all the pros and cons and don’t forget the nasty stamp duty costs which will come with every purchase and the resale costs if it doesn’t work.