Downsizing is one of those decisions that every older New Zealand is likely to have pondered over at some point. Perhaps you've just retired and are finding that you don't need as much space, or maybe you're looking to find somewhere smaller to open up some equity for residential property investment.

But just how do you know when is the right time to downsize? What considerations do you need to make?

Are you finding that your priorities are changing?Are you finding that your priorities are changing?

Changing priorities

After you retire, your wants and needs will change. You have more free time to pursue the things that you really care about – which is perhaps why Statistics New Zealand found that older people felt more satisfied with their lives and had a greater sense of purpose.

Shifting priorities also means that you could have the chance to save a significant chunk of change on any mortgage repayments that you are still dealing with. For example, QV gives us the median value of over $1,000,000 for a piece of Auckland City real estate – after all, it is one of the most popular places for residential property investment, so values are soaring. If you're lucky enough to have a piece of Auckland property, you could sell up while the market is at a peak and move to Tauranga, where properties are half the value of what they are in Auckland. 

You get away from the noise and lights of the city, and are also likely to find a greater proportion of similarly-aged people in the community – Stats NZ found that the rest of the country had a higher median age than Auckland, meaning that older people tend to stay out of this bustling metropolis.

Do you really need the extra space?

It might be time to convert that extra space into capital for a downsized home.

Sometimes it's the little things that could prompt you to downsize. Something as simple as spending too much of your retirement cleaning a house with rooms you don't even use! Who wants to spend all that time vacuuming when you should be enjoying yourself?

If you find yourself (or your joints) groaning at the thought of heading upstairs, it might be time to convert that extra space into capital for a downsized home. A smaller property gives you the chance to expand elsewhere, whether that is in the size of your garden, the quality of your furniture or simply updating the wallpaper. Better smaller and higher quality than larger and cumbersome.

Ensuring a comfortable retirement

Our advice, however, would be to consider investing that right back into property.

Residential property investment is an excellent part of a retirement plan, and has become more and more important in recent years as a means to continue building wealth even after your retire. There are plenty of ways that property can help you obtain a comfortable retirement. Even if you haven't made a single investment in your entire life, downsizing offers you the chance.

When you downsize to a smaller, less expensive home, you will be freeing up equity and giving yourself a lump sum of capital to play with. You could use this as a safety net for your retirement, or even just go on a deserved holiday. Our advice, however, would be to consider investing that right back into property. The passive income would give you a nice boost to your superannuation, and in a pinch you can sell the property and utilise the capital gains.

Are you thinking of downsizing but don't know the ins and outs of the financial requirements? Get in contact with us here at Goodlife Financial Advice and allow us to help you discover whether it's the right time to find somewhere a little more cozy to live.

Here's to your financial independence!

Daniel Carney
Authorised Financial Adviser / Investment Property Expert

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