Sinead Ryan: Top tips to consider if you're thinking about downsizing your home
I’m an empty nester this summer, and the house sure is quiet.
It won’t be long before my lot are back making noise but it got me thinking that it may not be long before it’s permanent and I’ll be rattling around in the place.
When we think of the housing crisis we normally think of homeless families in hostels or on social housing waiting lists, but there’s a crisis at the other end too.
Research by the ESRI has shown that Ireland is the empty nest capital of Europe with a whopping 70.6pc of homes considered under-occupied, compared to just 15pc in places like Italy and Greece. It’s even higher among the over-65s with an astonishing 91pc of houses far too big for the number of people who live in them.
It has led to calls for older people to downsize, but canny politicians draw a very fine line between incentivising older people to free up their large family homes, and pressurising them to do so.
After all, it’s hardly the fault of OAPs that they want to stay in the houses they paid for, reared their families in, and which are near the shops, churches and friends they’ve known for decades.
But in some countries, downsizing is not just popular but seen as the right thing to do.
In Dublin, four and five-bedroom homes are the most prized. Growing families squished into tiny houses or apartments due to affordability find it impossible to trade up. Add to that the growing number of homes left vacant when their elderly owner enters a nursing home (the contribution take from the sale or rent of the property is extremely onerous due to a loophole in the legislation – see panel), and you have a blockage which seems insurmountable.
This week I’m looking at how to approach downsizing if this is something you have thought about, and some tips to consider.
Principal private residences (ie your home) can be sold free of all capital gains tax so you won’t incur any revenue bill by selling up.
The obvious advantage is the cost saving. Your electricity, gas/oil and insurance will all reduce by moving to a smaller home. Older houses are much harder to maintain, so switching to a modern apartment or house is a great boon.
Property tax is increasing next year. It has been frozen since 2013, since when many Dublin homes have doubled in value. Moving out means this fixed bill will be significantly reduced.
Many retired people are asset rich, but cash poor. Freeing up equity without taking on a loan means you can supplement your pension income by either investing the extra cash from the sale, or buying a second property and letting it out.
Many retired people buy up the nicer duplexes in Dublin, living in one, and renting out the other.
Income tax is payable on rental income, however, but over-65s don’t begin to pay tax until they earn €18,000 (€36,000 for a couple).
You become a “cash” buyer for your new home, making you an attractive prospect in a market which is already tight – you can outbid mortgaged buyers to get the home you want.
You will have acquired a lot of possessions during your long life, and decluttering is essential when downsizing. You can opt for a storage facility for bigger pieces, but it will mean clearing out.
Moving away from your lifelong neighbourhood is a big deal for many, and a deal breaker for some. Give it plenty of time, and register with local estate agents, as a cash buyer, so you get first dibs on any suitable smaller properties that come up in your area.
1. Nobody should push you to move out. It should be your decision based on what you want and need in your twilight years.
2. If you’re not sure about it, consider renting for a year in a place you think you would like to live, especially if it’s a different county. You can rent out your own home to pay for it, and it will give you a better idea of day-to-day life than visits will. Do not go over 12 months, because if you do, you will be liable for capital gains tax on your home.
3. If you need to earn more income but are reluctant to sell up, you could let a room in your house instead.
Under the Revenue’s Rent-a-Room scheme, you can earn up to €14,000 per annum tax free by doing so. It’s not for everyone, but you can pick and choose your tenant and it’s ideal for those living near universities, given the short supply of rental accommodation. You don’t need to register as a landlord, provide meals, laundry or a rent book.