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Queensland’s peak real estate body has lauded the introduction of a potential new law that it believes will make downsizing an easier undertaking for Australian pensioners and consequently alleviate the housing supply shortage.
Real Estate Institute of Queensland (REIQ) welcomed the Labor Party’s filing of a bill to the Parliament that would give age pension recipients more time before their home sale proceeds affect their pension payments.
Under the new law, pensioners get an additional 12-month asset test exemption on their home sale proceeds.
If the property sold was the pensioner’s principal home, the asset test exemption would be extended to 24 months.
Furthermore, an additional 12-month extension will be available in extenuating circumstances such as natural disasters or building delays.
The exemption is designed to give people more time to purchase, build, rebuild, repair or renovate a new principal home before their pension is affected.
Additionally, the changes will see the deeming rate (an assumed rate of return on financial assets used when determining pension amounts) drop from 2.25 per cent to 0.25 per cent per annum on principal home sale proceeds intended to purchase a new home.
The lower deeming rate of 0.25 per cent per annum will be applied to sale proceeds in the income test during the exemption period.
Presently, when a pensioner or other eligible income-support recipient intends to use the proceeds from property sale to purchase or build another home, the proceeds are exempt from the social security assets test for up to 12 months.
REIQ chief executive Antonia Mercorella said that if passed, it would incentivise pensioners to choose a size-appropriate home for their stage of life — a housing trend they called “rightsizing”.
“The REIQ is an advocate for ‘right-sizing’ incentives which allow older Australians to sell the family home that is now too large and move into a better-suited sized home,” Ms Mercorella said.
The executive also explained why a rise in the rightsizing trend would be a win-win scenario for both younger generations and pensioners.
“We think everyone would prefer to see properties freed up for growing ‘up-sizing’ Australian families, rather than seeing pensioners feeling financially stuck in properties that they aren’t fully utilising and aren’t fit for their needs,” Ms Mercorella stated.
She said that while ageing in place or staying in your own home as you get older is a social trend in the country, she noted that high transactional costs is one of the main reasons older people are unwilling or hesitant to sell and are holding on to their properties for far longer than is ideal for their circumstances.
Ms Mercorella highlighted that REIQ has been a strong supporter of initiatives that are seen to promote downsizing and that will ease the supply shortage in the housing market.
“In the lead up to the last Queensland state election, we called for stamp duty exemptions for older Queenslanders arguing that the removal of this costly tax would provide senior citizens with an opportunity to move into more age-appropriate housing and create more housing options for young, growing families,” Ms Mercorella stated.
While the potential law is seen to add fuel to the downsizing trend, the executive highlighted that further initiatives are needed to have a significant impact.
“The REIQ supports initiatives that make downsizing a much easier financial decision for older Queenslanders, to significantly free up much-needed housing stock, and our view is more can be done at all levels to achieve meaningful change,” she concluded.
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