In a trend likely to escalate in years to come, baby boomers are downgrading and selling their family residence as their children leave home.
In an ironic twist though, it seems that many baby boomers are downgrading to the type of dwelling that would once have been sold to first home buyers.
Conventional wisdom once assumed that when boomers retire and sell their family home, that they would move to coastal areas. But this is not happening. Boomers are now choosing to work less hours rather than fully retire. This has led to them downgrading their primary residence to smaller homes and units to allow them to stay in Sydney.
Like the current generation of first home buyers, boomers also want to be close to the central areas like Cronulla, Miranda and Gymea.
Boomers are not battling the kids for the TV remote anymore; they have become fierce competitors against their grown up kids in Sydney’s hot property market.
Until recently, it would have been reasonable to expect that a one bedroom house would have sold to a first home buyer and/or renovator looking to further improve the property. First home buyers are the ultimate losers in this current boom. Many of them are learning that trading down in a booming market is easier than getting started in one.
On 1st January 2012, the NSW State Government altered the First Home Owners Grant, to assist first home buyers to get into the property market.
Assistance for first home buyers was removed from existing dwellings but increased on brand new dwellings. The aim was to create a building boom to increase overall supply, which it did. However noble the State laws are in their good intentions, unfortunately they clash with Federal laws relating to foreign investors.
Foreign investors are unable to purchase existing dwellings but they can purchase brand new dwellings. That is, the same dwellings that the NSW Government had incentivised first home buyers to buy.
Whether it be a cashed up baby boomer downgrading, a local investor speculating on the market going even higher, or a foreign investor, first home buyers have never had it so tough. As prices escalate, they are being forced to make bigger commitments to housing loans every month if they want to get into the market.
The property boom has now spread to all price ranges in Sydney. However, it’s strongest at the ‘affordable’ end of the scale. Given that baby boomers, first home buyers, investors, foreign buyers & renovators are all chasing similar dwelling descriptions, the ‘affordable’ stock will keep drifting towards an ‘unaffordable’ price tag for first home buyers.
Many boomers do offer financial assistance to their children to help them get into the market. It’s a wonderful gesture, but it’s worth noting that boomers are doubling down on the property market.