Generation downsize: How to trade down to a smaller home

With the number of citizens aged 65 and over expected to reach one million in the next decade, where to live out one’s golden years is set to become a national conversation. As the older population looks set to soar, cashing out and “right-sizing” are property trends to watch.

With children fledged and flown some find themselves maintaining a house too large for their needs. Tending to garden and gutters, heating rarely used rooms and paying property tax for the privilege can start to feel like a drain. But if you choose to downsize, what’s the first step?

A 2016 survey by the Government Housing Agency found two-thirds of over-65s want to live in their own homes for as long as possible. Some 15 per cent however, expressed a desire to move to a different property in their community.

Do the prep

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Location is the most important thing, says architect and access consultant Fionnuala Rogerson. “It’s important that you are not isolated and that you can walk to all the activities you most enjoy doing and that you most need to do. Whether it’s the shops, theatre, the park, in order to keep active and healthy.”

But would-be downsizers can find the idea of living in another house hard to get used to. “Quite often what they need to do is go out, have a look around, familiarise themselves with what’s available,” says Rena O’Kelly, director of residential business at Sherry FitzGerald. Keeping an eye on property sales locally and attending some local house viewings can be an eye-opener.

“They’ve done ‘traditional’ for an awful lot of their lives,” says O’Kelly. “Sometimes, they are the ones who embrace and welcome all the modern attributes of new builds.” From the pleasing sound of a soft-closing cupboard and a bathroom with underfloor heating to the cosiness of an A-rated sitting room, there’s much to like.

With appetite whetted, it’s time to get practical. “The first step is to get a professional valuation of your own home. This will inform your budget,” says O’Kelly. While the property price register may tell you what your neighbour’s house made, if yours needs work, a valuation is a reality check.

Next it’s decluttering: whether it’s the Sylvanian family collection of your emigrant daughter or your married son’s Leaving Cert books, it’s time to exhort your beloved former housemates to clear their stuff.

If you have a specific home in mind, try to envisage where your possessions might go. Start with the big items. Will that antique coat stand work in a modern hallway? Sifting through a lifetime of possessions and their memories is hard. Decluttering gradually over time can alleviate the emotional and physical toll when it comes to the big move. It also leaves you better poised to pounce when the right property comes along.

Wish list

So what should be on a downsizer’s wishlist? “A decent-sized entertaining space to fit a big table where they can still have all the family back is often a priority,” says O’Kelly. “They’ve been hosting Sunday dinners and Christmas dinners and they still want to have control over that. They don’t want to feel the move is eliminating family coming over.” Some outdoor space for the grandchildren is a bonus.

Three-bed properties are popular with those who have seasonal visitors, says O’Kelly. “Particularly where children have moved abroad. They come home at Christmas and Easter and parents will be looking to house them during that time.”

Buying a new-build or something off plans can be easier. “Very often you can put a deposit down which the builder will facilitate, subject to the sale of your own home,” says O’Kelly. “It’s a really nice way to dovetail in the sale of a family home and a new purchase. You can sell and close in one transaction.”

Easy living

After location, it’s the dwelling itself. Most people will prefer to live independently in their own home for as long as possible. If, as you age and you need to adapt your new home to do so, space is crucial.

“Is there adequate space in the house for the things you will need as you get older, or are likely to need?” asks Fionnuala Rogerson. “Often the kinds of things that are on offer for older people assume that they have nothing and don’t need any space. But you still need space. And you will need it for using the kinds of equipment and aids you may need as you get older.”

A downstairs bedroom, or a room that can become one is important. Good circulation space is important too. Critical areas are the bathroom and kitchen. “A lot of people now seem to think they are designing for older people by showing a small wheelchair in a bathroom with an outward opening door,” says Rogerson. This layout can be impractical. “They don’t think about the impact of the outward opening door on the corridor – you can’t get around it to get into the bathroom if you are using a wheelchair.”

Good natural light and views are a bonus. “Things like lower windowsills and being able to see out are important,” says Rogerson. “If you are sedentary or are in bed a lot, can you see out? To be able to see activity outside, being able to see other people, having that connection with people, I think is very very important.”

The kids are all right

Talk of selling up can precipitate family conversations about financial planning and inheritance. Some parents not short of a bob may opt to pass the family home to a child at a favourable rate. But gift tax can arise depending on the deal struck.

“If, for example the house is worth €600,000, they might agree that one of the kids would pay them €300,000 for it,” says tax partner at Grant Thornton Declan O’Hanlon. As the €300,000 shortfall is under the €320,000 parent to child gift tax threshold, the child is exempt from gift tax. This presumes the child hasn’t received previous gifts. Amounts exceeding the threshold are taxed at 33.3 per cent.

While releasing equity from the home may yield a windfall, downsizers are advised to put on their own mask first.

“Be careful not to divest yourself of your assets completely – what happens if you need full-time care in a nursing home, or your spouse does?’ says O’Hanlon. “You don’t know what’s around the corner. It may not be wise to divest everything.” In order to help others, take care of yourself first.

A fair deal?

For those who may participate in the nursing home support Fair Deal scheme, there are some things to note. In addition to 80 per cent of your income, a charge of 7.5 per cent of the value of any assets is also levied to pay for your care. (Halve these figures if your spouse or partner is alive). In the case of the property where you live, there is a three-year cap on this levy. After that, no further charge is made against that property.

If your home is sold after the three years, the annual 7.5 per cent levy on the value of the property now becomes a 7.5 per cent levy on the money raised from its sale – and this levy is not time-limited. It runs for as long as you avail of the Fair Deal scheme.

If you sell your home up to five years before making your Fair Deal application, the value of that asset will be included in the calculation of your assets and income – and 7.5 per cent of the value will be required as part of the annual payment even though you no longer own the asset.

Mind the gap

Many selling their family home to downsize will have built up equity. Good financial advice will ensure the windfall doesn’t bring a tax headache. “If you sell your home to downsize and it has been your principle, private residence throughout your lifetime, there is no capital gains tax to be paid,” says tax partner at Grant Thornton, Declan O’Hanlon.

Relief however is restricted for homes part-used for business purposes, those on grounds larger than one acre or those with development value. If you have already downsized but are still trying to sell your previous home, you will be regarded as having lived in the house for the last 12 months you owned it.

Of course, if old age is always 15 years older than you are, there is still plenty of time to ponder. But with your future self in mind, it’s worth planning ahead.