The great migration has begun. Baby boomers are capitalising on strong prices by selling their family home and downsizing. Early indications suggest luxury apartments are their destination.
Whilst this great migration is only in its early stages, there is no doubt that it could have a disruptive impact on the property market. History tells us that whenever baby boomers act in unison, it creates either a boom or a bubble.
However, this anticipated ‘sea change’ may not unfold as many predict. Many boomers who have already headed out of Sydney have since noted with regret that they are isolated from friends, family and crucial medical facilities, including hospitals. This in turn, has led to the current trend of downsizing to apartments in the same region (often luxury ones) resulting in an ‘apartment change’ rather than a ‘sea change’.
Apartments which are close to Sydney Harbour and/or with ones with great views tend to be in the highest demand. Baby boomers have shown a preference for high quality, low maintenance apartments which offer good security. Such apartments allow boomers to live an enviable lifestyle and lock up worry free, whenever they wish to travel. Apartment blocks close to shops and amenities are also marked as favourable by boomers.
There is no doubt that the recent rally in house prices has spurred many to make the move. With house prices up and retirement beckoning, the timing is now right. Many boomers have used and will continue to use the equity in their family home as their superannuation. Given that compulsory super was only introduced in 1992, many boomers do not have the luxury of massive amounts of super in their managed funds accounts.
It has been long thought that house price growth outstrips that of apartments, but that may not be the case over the next few years. Investors have largely been sidelined in the market rush for luxury apartments in recent times. Overseas buyers and boomers have pushed prices to levels which don’t quite make sense for a ‘buy and hold’ investment plan.
The Federal Government is quick to tell us that Australia is ‘open for business’, but the State Government could just as easily claim that ‘Sydney is under construction’.
Mass construction of luxury apartments across the Inner West and Inner City are taking place right now with completion dates due in the next 18 months. Many of these apartments have sold in ‘Off the Plan’ transactions. The boomers who have bought into these developments will be bringing their current residences to market as completion nears.
If this type of development continues, the trend of buying ‘off the plan’ and then selling the family home as completion nears, is likely to gather pace. Only time will tell whether there are sufficient buyers at current prices to absorb the increased number of family homes that will hit the market in the decade ahead. It certainly looks good for boomers who are downgrading at present.
However, it would be wise to remember that all markets have inevitable dips and corrections. A price drop on your family home that coincides with your need to settle your ‘off the plan’ purchase can be awkward to say the least. This is a major reason why buying ‘off the plan’ needs to be carefully thought through. You could find yourself buying in a rising market (now) and selling in a falling market (later). Naturally, it can happen in reverse too. However, pleasant surprises are much easier to deal with.
Staying local and staying involved
Common wisdom suggests that most baby boomers will retire, sell their family home and head for the ocean. But this assumption overlooks many of the practical challenges associated with making a sea change mentioned earlier.
While the scenery is great, the isolation often begets loneliness. This baby boomers anticipated ‘two step’ move from the city to the ocean also overlooks an unexpected third option where some baby boomers will choose to work past their retirement age. Also, a few may be unable or unwilling to retire from work.
For these boomers, downsizing within their existing community and staying local means they do not have to give up work, change jobs or become isolated.
Hence, there are many benefits for lots of boomers to stay connected with their existing locations. They get to remain close to their children and grandchildren, friends and social networks such as their golf or bridge clubs. It is far easier to stay connected than to start out again with new friends in new surrounds.
Many baby boomers are downsizing now and unlocking the equity in their large family home in order to gain a better lifestyle, involving shorter commutes to work along with a low maintenance, high security apartment in a ‘stay local’ area. While this trend in baby boomers lifestyle preferences toward apartments may be unexpected, its quite practical. Once the benefits of staying local and staying connected are weighed up against making a sea change, the decision is a no brainer for many.