Should retirees be encouraged to downsize?

It’s old news to say that New Zealand is in the grip of a housing price boom.

The September 2015 statistics from the Real Estate Institute of New Zealand (REINZ) found a new national record median price among houses sold during the month, of $484,650 – up $64,650 (+15.4%) on September 2014. This included a rise of $156,000 (+25.4%) for Auckland’s median price, from September 2014 to September 2015 – from $615,000 to $771,000.

Overall, for the 12 months ended September 2015, the total value of residential sales was $51.808 billion. The breakdown of the value of properties sold in September 2015 compared to September 2014 is as follows:

September 2015 September 2014
$1 million plus 1,042 12.7% 428 7.2%
$600,000 – $1 m 1,970 24.1% 1,173 19.8%
$400,000 – $599,999 2,009 24.6% 1,570 26.6%
Under $400,000 3,153 38.6% 2,740 46.4%
All properties sold 8,174 100% 5,911 100%

Source: reinz

With New Zealand’s population getting older, it’s almost inevitable (albeit frustrating) that national conversation will turn down the path taken in other countries around the world: what to do with “older people” and their fixation for staying put in the home they once scrimped and saved for?

Let’s look at the aging population: according to the government, in 2011 the first of New Zealand’s baby boom generation turned 65. Today 650,000 people (14 percent of the population) are aged 65-plus – a 55 percent increase since 1994. That number is projected to reach 1.2 million by 2034, with people aged 65-plus making up 22 percent of the population.

Government and futurists take what they deem as the serious, sensible approach, quoting predicted future taxation shortfalls, lack of workforce participation and fear, disguised as cost pressures, of the coming hordes of “very old people” ambling over the hill.

Those thinly-veiled scare tactics do little to move the aging masses, mostly because we operate on the principle of ‘Stay Calm and Panic Later’. We’re also acutely aware that parliamentary terms in this country are around three years (although John Key has demonstrated longevity). Nevertheless the short parliamentary term makes it difficult for politicians to put in place an unpopular long-term strategy which can’t be reversed.

Point number two – the property market

It’s hot, as we all know, particularly in Auckland. Consequently it can be difficult for young people to get onto the property ladder and Struggle Street is overflowing with a backlog of would-be domestic buyers shaking themselves off after being knocked back onto ground level.

As the clawing and scraping intensifies, the glaring problem of illegal foreign real estate purchases has been consigned to the background of diplomacy. Next focus may well be – oldies! “Why are they still rattling around in their big castles when they should be forced to sell and live in a shoebox so we (the next and instant-gratification generation) can “get on with our lives” – insert raising of eyebrows here.

Parents of all means always want what’s best for their children but against this moralistic catch-cry the only answer for many older folk is to dig the heels in. It’s pointless to remind kids that we had to save every penny, too, in order to buy a modest house at higher interest rates.

Haven’t we already contributed by putting up with way-too-adult children living free at home and taking advantage of Mum’s endless cooking and washing services? Not to mention permanently minding grandchildren to save on childcare fees? Lending our cars, money and clothes in some cases … the list goes on.

What is it about bedrooms?

When we talk about real estate a classic case of contradiction in terms comes when we count how many bedrooms the house has. For instance, renovators constantly spruik that adding a third bedroom is the best thing you can do if you want to maximise your sale money.

However, the dreaded third bedroom takes on a sinister life of its own if, heaven forbid, the house belongs to an “older person”.

All of a sudden, that third bedroom becomes a weapon to wield against older people who refuse to sell their family home. The language has even been manipulated to suit. It is now considered “overconsumption” for couples to be living in a house that has three bedrooms. But only if you are older. It smacks of age discrimination to me.

Has the thought not occurred to those who enjoy flinging guilt in the direction of the elders they should be respecting that there are a number of ways bedrooms can be gainfully occupied?  They can be used to house a snoring partner and prevent sleep deprivation. Space for children and grandchildren – oh, and yes, I know it’s surprising but older people do have friends that come and stay. And finally, spare bedrooms make great offices and hobby rooms when the kids fly the coop.

It’s not all about the money

Believe it or not, older people are not necessarily permanently welded to a pile of bricks in the same suburb – they are attached to the area, the amenities, friends and neighbours. They are also equally willing to explore other sea/tree-change options to enhance a lifestyle they perhaps could not have enjoyed in previous years.

Freedom or a change in circumstances leads many to the liberating decision to embark on a new adventure. From my point of view, this opening up of choices is a more effective way of encouraging downsizing than the current smear tactics merely for the purpose of putting more housing stock on the market at cheaper prices. It will be interesting to see if this desired result truly is the case in the years to come. The cynic in me is not convinced.

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