Jason Calleja
Jason Calleja

Senior Financial Adviser


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Are the stars aligning for downsizers?

The property market has been front and centre in the lead up to the Federal Election, after the RBA raised interest rates by 0.25% in April, despite earlier flagging rates would likely remain at historic lows until 2024.
The central bank’s hands are currently tied by record inflation, running at 5.1% over the 12 months until March 2022, almost double the RBA’s target of 2-3%.

The significant rise in inflation has been fuelled by the perfect storm of a spike in economic activity following the pandemic lockdowns, pandemic stimulus, low unemployment and interest rates; as well as both global and local supply-chain constraints, created by macro events like the war in Ukraine, floods in Northern NSW and Queensland and the aim of a zero COVID policy in China.

The Federal Election campaign has also brought new policies from both parties that could have a further inflationary effect on property prices. Mix this with the reality of interest rate increases confronting owners, and property markets have stalled, while the market watches and waits for the impact of the election result and anticipates further interest rate rises ahead.

The question is: What does this all mean for property markets and FMD clients looking forward?

To help answer that, we spoke with property investment specialist David McMillan, Director of Performance Property Advisory, who’ll join us to share their latest property market outlook for each state in our upcoming webinar at 12pm on Tuesday 24thMay.

Property market and interest rate chatter has been running hot, David. What’s your take on the post-election outlook?

Hi Jason. We think the housing market is heading towards the peak in Melbourne, but it could have a bit further to run after the election and before the impact of further interest rate rises. Pre-election softness in the market is par for the course, so we don’t think what we’re seeing in the market right now is necessarily what we’ll see post-election; assuming interest rates don’t rise too far and too fast.

Suburb dependent, it’s worth holding a house in Melbourne to benefit from short term post-election growth if you already own, but it’s a risky time to enter the house market.

How are the stars aligning for downsizers?

As you know, from July 1 this year, the benefit of downsizer rules [which enable a couple to contribute up to $600,000, or a single person up to $300,000, of the proceeds of the sale of their primary residence into superannuation, without counting towards their contributions caps] were made available to those aged 60 or over. Previously, downsizers had to be 65 or over to benefit from the tax-free saving advantages. So this opens up the opportunity to many more people.

Of course, the benefits are greatest for downsizers when the market is at its peak and they can maximise the proceeds from the sale of their home. This gives them the best chance to boost their super and maximise what they can spend on their new downsized property, which is something I know you’ll talk about in more detail during our webinar next week, Jason.

What is the difference in the outlook for house and units?

In Melbourne, for example, we think house prices are at or near the peak, but the outlook for short-term growth in units is stronger. This is another way the stars are aligning for downsizers because they want to be selling at the house price peak and buying into units that represent good value and have momentum for growth, while providing the lifestyle benefits they want. For anyone with that aim, now could be the right time.

Thanks David. We look forward to seeing Performance Property’s research and projections for all states and both property types in the upcoming webinar. We are also pleased to be able to offer FMD client’s access to your property research and advisory services for investors as part of our partnership, and we look forward to sharing how that all works too.

Register for our property webinar to learn more

This webinar will provide insights for those thinking of investing, selling or downsizing or simply seeking a new perspective on residential property markets. The panel will also consider if now is the right time to put your plans in place, and understand the strategic opportunities available to you to maximise your financial situation.

Property Update: Are the stars aligning for downsizers?
12pm on Tuesday 24thMay.

Register here.

General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.