The downsizing dilemma: not an easy decision

"No longer is downsizing the traditional sway of retirees or empty nesters," says Kim Woods, franchisee at Tyson Properties Morningside, Durban. "It's become a popular choice for those who want to realise the benefit of cashing in their larger property investment asset to pursue other endeavours such as international holidays, starting a business, or even just to supplement their savings. For others it's a necessary evil given the ongoing sluggish economy and cost-of-living increases."

The latter is certainly a major motivator but, says Woods, downsizing may not necessarily reduce household expenditure significantly, but it will definitely help in cutting down on the difficult and time-consuming maintenance of an older or larger home and garden. "Estates and sectional title properties respond to this because they offer amenities that can be tapped into with little to no effort."

Estate living has become exceedingly popular as a result, and many that migrate to this lifestyle are seeking a live-work-play environment where all their needs are centralised in close proximity to their home, be that sports activities, high levels of security, nature and views, restaurants, shops, and even schools. "But these come at an additional non-optional fee, often considered as 'hidden' costs," warns Woods.

Financial implications

This is where the red flags begin to flap. "If the downsizing choice is to sustain a comparable lifestyle to your current one on a large property, estate living may actually be more expensive. In some cases the per sqm price of the estate unit, which has less space, may carry monthly costs that are unaffordable.

"Downsizing to an estate may cost thousands of extra Rands per month, reflected in the levies and the rates," says Woods, "especially if the estate is well-maintained and tailored for the discerning buyer. This is something downsizing buyers often forget to compare to their existing household budget.

"Another oft-forgotten aspect of downsizing is the costs associated with selling and buying such as agent commission, bond cancellation fees, transfer costs, removal services, and compliance certificates," Woods points out. "This could worsen a financial fall out especially if the existing home requires maintenance and repair to bring it to a saleable condition."

Market conditions affect decision-making

Downsizing is also proving most costly for those who still have bonds on their existing properties, and more so if they haven't done the math. "A smaller home might translate into bigger monthly home loan payment, which, when combined with a high monthly levy and rates that increase annually, can prove especially difficult to manage by those on a fixed income or facing retirement."

Another potential pitfall that can have significant financial implications is signing an Offer to Purchase before selling the existing property. "Many sellers have been forced to drastically reduce the selling price when they are under pressure to sell within a specific timeframe. Relevant to this is that the current average time a property is on the market is 12 to 14 weeks, which is double the time it used to be just a handful of years ago."

It's not all doom and gloom though, despite the hard shift that downsizing may introduce. "There will be a lifestyle change, but this can be positive," says Woods.  "If insecure or uncertain whether it's the right decision to make, there is always the option to rent first. Similarly the existing home may be rented out which may be able to fund the new downsized lifestyle. This is all, obviously, dependent on pricing, be that the price of the old property or the new."

Money doesn't buy happiness

Downsizers should not be discouraged by the negatives because careful planning can be very advantageous. "Deciding to move into a smaller home should never be primarily about spending less.  If the focus is angled more towards investing in a new lifestyle enhanced with things money can't buy, you'll have more time to spend on things that really matter, such as family and your passions, rather than directing it to property maintenance and heightened security measures, for example," says Woods.

"I highly recommend that those considering downsizing engage with a qualified property practitioner, who will need to understand exactly what you want to achieve when downsizing," says Woods. "They can be an exceptionally knowledgeable resource in helping you navigate through the evolving housing market, offer customised solutions, and negotiate favourable deals for all parties.