Young Aussies call out major Boomer cash issue: 'Why try anymore?'

Young Aussies have called out a frustrating aspect of the property market that leaves older Australians in an almost "impossible" situation. While empty-nester Baby Boomers choosing to downsize can free up larger homes for families, it appears to have a trickle-down effect on property buyers on the lower end of the scale.

Digital Finance Analytics data released earlier this year showed a whopping 90 per cent of Aussies aged 65 to 74 are living in a house too big for just two people. Former real estate agent Jack told Yahoo Finance that cashed-up older Aussies who want to downsize can rock up to auctions with "millions" at the ready and are able to price out any first-home buyer.

"There's sort of been this idea that if the Boomers got out of their houses, it would be a lot easier for all of us, which, in reality, is not actually the case," he said.

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"This downsizer might have just sold their four-bedroom home for $1.4 million. They've got a million dollars in cash to play with. For them to go and bid $750,000 for the final property that they're ever going to live in, it's absolutely nothing to them."

Carina discovered this conundrum when she and her boyfriend recently inspected a "beautiful" three-bedroom property but noticed the majority of people also looking at the home were at least 50 years old and above.

The real estate agent told her that not only would she be "competing" against property investors and first-home buyers, but also older Aussies who were downsizing.

"[Older Aussies are] looking at units and apartments and small houses that we're looking at. Problem is, is that they sell their home for $1-2 million, whatever it may be, and go and buy these other properties for half [a million] - $800,000 and then price everyone else out."

Another Aussie took to social media to rant about being outbid at a recent auction.

"Just got crushed at auction by Boomers downsizing. Went for $140k over the top of the range. He just outbid us smugly at every moment. What’s the point of even trying?" they wrote.

Jack explained to Yahoo Finance the presence of older Aussies with money to spend can cause property prices in an area to increase because Boomers are able to keep bidding until they get their hands on their new address. Similar properties in the region can then use that sale to adjust their price expectations and lift the suburb's median price.

He admitted that it leaves Boomers in an "impossible" situation where they're faced with calls to downsize from Aussies with growing families, as well as cries from young Aussies that their downsizing is ruining the property market for them.

The other side of the downsizing Boomer coin

While there appears to be no shortage of young Aussies getting outmanoeuvred by their older downsizing counterparts, there are plenty of Boomers holding onto their large properties for dear life.

Despite Digital Finance Analytics finding an overwhelming number of older Aussies sitting in large homes, only one in 10 had plans to downsize.

While moving into something smaller can provide less maintenance and work, those resisting a smaller address said the price of the replacement home, the high cost (both financial and physical) of moving, and the fear of change, were the biggest barriers to selling up.

Not only that but there was another reason behind the trend.

"Any money you have tied up in the family home is exempt from the age pension eligibility rules," AMP Director Ben Hillier said.

"However as soon as you release that equity and put it into another vehicle like superannuation or the bank, you start to get penalised in terms of how much age pension you're eligible for."

'Why Baby Boomers should give up their family homes'

While finance expert David Koch is sympathetic to Baby Boomers wanting to stay put in the place where so many memories were made, he gave several reasons why they should downsize.

In an op-ed for Yahoo Finance, Kochie said the upsides of moving definitely outweigh the downsides.

"Our big family homes are great when they are filled with family," he wrote.

"But, when the kids and grandkids are grown up, they’re often not worth all the work. Imagine the time you’ll save not having to mow a huge lawn or clean four bedrooms."

He added leaving the decision to downsize too late "can be disastrous" because the burden on your loved ones "could be enormous" if you can't live on your own.

The other plus in moving to a small home, according to Kochie, is that it could help you top up a tax-free income stream.

"Downsizers can make a contribution of up to $300,000 into their super when they downsize their home. It’s a great boost, especially if you’re over the age threshold for making voluntary contributions," he said.

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