There’s no doubt that the current economic climate is hitting hard, particularly those looking to buy a home. In Western Australia, like across much of the country, we are seeing increasing real estate prices, and combined with economic conditions that are constantly shifting, many are considering downsizing, and moving into smaller, more manageable properties.
What’s Happening in the West?
Here in the west, our economy has shown quite a level of resilience despite global economic uncertainty, and it has been those key sectors such as mining, agriculture and tourism that are continuing to play vital roles despite the increases in cost of living. And while interest rates have been relatively stable of late, our historically lower property prices have been attracting more investors and owner occupiers from the eastern states looking for more affordable homes.
This year, the real estate market across Western Australia has presented, and is looking to continue to present, a mix of opportunities and challenges for those in the market and those looking to enter the market, including:
Property prices: There has been growth in property prices, particularly in the more populated areas, while regional areas have seen a variation in how quickly property prices are growing.
Buyer’s Market vs Seller’s Market: Currently much of Perth is a sellers’ market, with properties sitting on the market for just 10 days on average. In comparison, across the country, the average is 30 days.
Perth prices saw an average of a 21.3% price increase in the 12 months from April 2023, and there are predictions we could see another 10% increase in 2024, and 8% increase in 2025.
All of this is leading to a lot of people downsizing for better property prices, lower (or nil) mortgages, and the opportunity to keep up with cost-of-living increases.
Financial Benefits of Downsizing
Here at Tinee Homes, we regularly speak to tiny house buyers who are looking to either downsize from their bigger, more expensive home, or looking for a better price point to move out of the rental market. Many talk about the financial benefits of downsizing, and we have to agree – there are some that make this move to a tiny home much easier.
Cost Savings: Moving to a smaller property generally reduces expenses related to maintenance, utilities, and land taxes.
Capital Release: Selling a larger home can free up significant capital, which can be invested or used to improve quality of life.
Reduced Mortgage Debt: Downsizing often allows homeowners to pay off existing mortgages and potentially purchase a new property with little or no debt.
Lifestyle Improvement: With reduced financial burdens, homeowners can afford to travel, pursue hobbies, or invest in health and wellness.
Costs Involved in Downsizing
While there are some cost savings, there are of course factors you may need to spend money on to downsize, including:
Selling Costs: Includes agent fees, marketing costs, and legal fees. In Western Australia, these can range between 2% to 3% of the property’s selling price.
Buying Costs: Stamp duty is a significant expense, calculated based on the property’s purchase price. In many instances, tiny home buyers may be able to save on stamp duty, however for others, this will still be payable if you buy a block of land. Other costs include legal fees and moving expenses.
Renovation and Adjustment Costs: New properties may require modifications to fit personal needs or tastes, which should be factored into the budget. In the tiny home world, you may find that additions outside package deals will add to your costs, and if you need to buy new appliances for your new home, you will also need to take this into consideration.
Government Incentives
This one is more for those who are over 65 – changes to regulations allow individuals aged 65 and over to make downsizer contributions to their superannuation of up to $300,000 from the sales proceeds of their primary residence.
This may be a great incentive for those who have been tossing up whether to sell off the family home and move to something smaller and more manageable.
Strategies for Maximising Financial Outcomes
There’s a saying when you buy “time in the market and not timing the market” but when it comes to selling, it is important to understand market trends – selling during a “buyers’ market” can maximise selling prices. If you are considering downsizing, it is well worth talking to a couple of local real estate agents, who can provide insights into the market in your area. You may also consider talking to a financial advisor who can provide strategies to meet your financial goals.
Downsizing in Western Australia can offer significant financial benefits, especially in the current economic landscape. For those contemplating a move to a tiny home, detailed planning and professional advice are essential to navigate the complexities and make the most of the opportunities available.
What are the Financial Benefits of Living in a Tiny Home?
There is no doubt that the tiny home movement is gaining traction right across the country, and the economic conditions we are experiencing at the moment, is making people consider whether there is something more – a more sustainable way to live, a more affordable way to live. Tiny homes are an appealing alternative to traditional housing, and whether it is driven by environmental consciousness, the desire for a simpler lifestyle or financial necessity, you aren’t alone in exploring this as a real alternative.
One of the most compelling reasons for downsizing to a tiny home is the financial freedom it can provide.
Lower Purchase Costs: Tiny homes are significantly cheaper to purchase than traditional homes. The average cost of a tiny home in Australia ranges from $50,000 to $150,000, compared to the national median house price of over $900,000. And you still have finance options when purchasing.
Reduced Monthly Expenses: With a smaller mortgage or no mortgage at all, tiny homeowners often experience lower monthly expenses. Bills, maintenance, and property taxes are also considerably less.
Eliminate Debt: Many tiny home buyers can pay off their homes outright or quickly, eliminating long-term debt and freeing up income for other pursuits.
Downsizing to a tiny home in Western Australia offers numerous benefits, from financial freedom and sustainability to a simplified, flexible lifestyle. As the movement grows, more people living in the west are discovering the joys of tiny living and the profound impact it can have on their lives. Whether driven by economic considerations, a desire for a reduced environmental footprint, or the pursuit of a minimalist lifestyle, tiny homes represent a significant shift in how we think about housing and living spaces.
For those considering making the leap, while the journey to tiny living can be difficult to get around the idea of, there are certainly some financial benefits in a real estate market that doesn’t seem to be slowing down.