The do's and don'ts of downsizing
Category Newsletter: Lead Article
The notion that bigger is better when it comes to the size of your property is increasingly being challenged. More homeowners are choosing to downsize - and long before they reach retirement age, which was traditionally the time for going smaller.
"Consumers are taking great financial strain at the moment with the combination of high interest rates, high inflation and soaring food, fuel and electricity prices. We're seeing more clients looking to go smaller - there's definitely a new awareness around the cost of space and what it means to the homeowners," says Skoko Sebola, Principal at Leapfrog Midrand.
Financial downsize
He goes on to explain that some property owners downsize due to financial necessity. "As recently as three years ago the interest rate was at a record-low, thanks to the pandemic, but it's been steadily on the rise since. For some people this means they can no longer afford the monthly bond repayments, in which case opting for a smaller, more affordable property is the best - and sometimes only - option," Sebola says.
A property that you can comfortably afford will always be the better investment option, and by implication the better lifestyle option. For many homeowners the cost of servicing the bond is their single biggest monthly expense so when times are tough it may make sense to reduce the size of the bond.
"If you are looking to downsize for financial reasons it pays to get in touch with a property professional for advice and guidance. You want to make sure your next purchase still makes sense from a value perspective and that you understand the costs involved in buying and selling again," Sebola shares.
There are a number of costs involved in selling a property, including bond cancellation fees, the cost of compliance certificates and agent commissions, and it pays to be aware that you may first incur additional expenses before financially benefiting from downscaling. Similarly there will be costs associated with buying again, including sales commission, bond registration, transfer duty and the associated legal fees, as well as the cost of physically moving your possessions.
It may also be that - various factors considered - that the average difference between the selling price of a medium-sized home and the cost of a small property is negligible, for example, which is something worth interrogating with the help of a property professional and/or financial advisor.
Lifestyle downsize
For another cohort of homeowners downsizing is a lifestyle choice. "Increasingly we are meeting clients who are looking to downsize, not because of financial constraints, but because they prefer a smaller property and the kind of lifestyle that allows for," Sebola says.
For years the so-called "lock-up-and-go" home has been touted as the convenient, modern choice for homeowners that value an independent, fuss-free lifestyle. And while these properties are often smaller in size, they don't compromise on comfort, convenience or even value.
The lifestyle motivation to downscale typically has to do with the responsibility of managing and maintaining a large property. "Clients tell us that their time is precious and their resources limited, and large properties require a lot of both, which is something smaller and more manageable appeals to more and more people," Sebola believes.
Homeowners looking to do a "lifestyle downsize" will also benefit from working closely with a trusted property advisor, who can assist in finding the right property at the right price in the right location. "Even if you're downsizing because you want to - and not because you have to - it can be a daunting process with financial implications and unforeseen costs so make sure you have a professional by your side," Sebola advises.
Author: Leapfrog Property Group
