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Downsizers pay $1.5m in cash to settle Toorak apartments
Wealthy Melbourne downsizers are using the massive windfalls earned from selling their suburban homes to settle new apartment purchases entirely with cash – a trend which highlights the extreme polarities in the housing market.
More than a third of buyers (10 out of 28) paid $1.48 million in cash on average to settle their off-the-plan purchases in an upmarket development called The Maison in Toorak.
Most of these downsizers sold out of large family homes in neighbouring suburbs where median selling prices ranged from $2 million (Glen Iris) to over $4 million (Toorak) in January, according to CoreLogic.
Developed by Chinese group Ever Bright (EBG) The Maison features 28 large residences across five grand European-style buildings designed by local architect Christopher Doyle.
“The average age for Maison purchasers is around 50 plus and most of them are local Australian downsizers,” said Allen Wang from developer Ever Bright.
“Many of them have already retired and are selling or have sold their house in surrounding suburbs to pay for their new home in Maison,” Mr Wang said.
All the luxury residences sold off-the-plan with two-bedroom units priced from $820,000 and three-bedders starting from $1.16 million. EBG acquired the 1.5 hectare historic Stonnington Mansion for $28.5 million in 2012.
The all-cash settlements come as Australia deals with a worsening housing affordability crisis with a generation of young Australian families unable to raise a big enough of a deposit to afford even an entry-level home in Sydney or Melbourne.
But at the other end of the spectrum, older Australians who purchased property decades ago are benefiting from the surge in pricing that has occurred over that time.
Figures from CoreLogic show that since 2000, the median Melbourne dwelling price has risen 314 per cent while in Sydney, dwelling prices are up 236 per cent over the same period.
In this month’s federal budget it was announced that Australians aged 65-years and older would be able to contribute up to $300,000 from the proceeds of the sale of their home to their super balances in a move aimed at encouraging downsizing to more suitable housing and the freeing up of family-style housing stock.
But Brendan Coates from economic think tank the Grattan Institute said the trouble was that research shows most seniors are emotionally attached to their home and neighbourhood and don’t want to downsize.
“When people do downsize, financial incentives are generally not the big things on their minds. And so most of the financial incentives will go to those who were going to downsize anyway.
“And the government has chosen a strange group to help downsize. It is waiving new rules that restrict wealthier retirees from making large post-tax super contributions if they downsize.
“But the plan ignores pensioners, the group most financially disadvantaged by downsizing because the family home is exempt from the pension assets test but any home equity unlocked by downsizing is not,” Mr Coates said.