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Regional property growth boom benefits seniors

20th September, 2021

Much has been written in recent months about the very strong property price growth in Australia's capital cities. In the June quarter of 2021 alone, the national average house price appreciation was 5.8% and a whopping 18.8% for the year. Whereas, unit price appreciation was more moderate (but still healthy) at 2.1% for the quarter and 6.8% for the year1. The annual growth rates in Sydney, Canberra, Hobart and Darwin all topped more than 20% with this growth being fuelled by historically low interest rates.

The COVID-19 outbreak with its capital city lock-downs has driven strong property growth in the regions. This has led to a trend where people, who are no longer tied to capital cities for work and are seeking either a tree or sea change are able to do so. The ability to enjoy a more relaxed lifestyle, and to buy property at more affordable prices are just some of the key drivers of price growth in the regions. You can read more about this over at Domain.

Many popular regional areas have recorded price growth exceeding 20% over 2020-2021 including Ballina (NSW), Byron Bay (NSW), Bega Valley (NSW), Benalla (VIC), Colac/Ottway (VIC), Burdekin (Qld), Gympie (Qld), Broome( WA) and Denmark (WA).

This surge in regional property growth benefits those already living there, particularly seniors. Research shows seniors are less willing to downsize and move to a new area due to the dislocation it creates, and emotional upheaval that results from moving away from friends, networks, and the communities they are familiar with.

Whilst there are certainly some who welcome the change of downsizing or relocating, for those who want to stay in their home, there’s a way to access their increasing property wealth without selling. The government’s Pension Loans Scheme (PLS) is unfortunately not promoted enough, and as a result it’s not an option many retirees are aware they have.

To be eligible for the PLS, seniors need to be at least Age Pension age2 or one if in a couple, meet the age pension residency requirements, and own title to form of real estate property anywhere in Australia. Importantly, this includes self-funded retirees who do not receive any Age Pension.

With the PLS, seniors can boost their income in retirement by releasing some of the equity they have in their home (or other property) by up to 150% of the full age pension rate3. This means a full age pension couple can access up to an additional $718 per fortnight ($18,670 per year) and a self-funded couple up to $2,154 per fortnight ($56,012 per year). Whereas full age pension singles can access up to $476 per fortnight ($12,385 per year) and self funded singles up to $1,429 per fortnight ($37,155 per year).

Accessing professional assistance for your PLS application

Pension Boost has supported many clients living in regional and rural areas to successfully access the PLS. One of the reasons for this is that commercial providers of reverse mortgages (and other forms of equity release) are restricted under their lending policies from lending in regional and rural areas or for non standard forms of housing (eg farms, vacant blocks, large properties, etc). As the government's PLS operates across the whole of Australia, and any form of real estate* is eligible security — so long as you own the title and have sufficient equity in it — the PLS is a great alternative.

The recent spike in regional areas enables seniors to tap into this growth to help them fund their golden years. By way of example, let’s take the situation of Barry and Helen, a full age pension couple aged 72 years of age living in Colac, Victoria where the average house price is now $527,000 and has appreciated from $419,000 a year ago (up 28%) and $315,000 five years ago (up 67%). Barry and Helen would like to access the PLS so they can enjoy a better quality life, more so than they’re able to living on the Age Pension alone.

While they could access up to $718 per fortnight ($18,670 per year), they decide that $500 per fortnight ($13,000 per year) would be adequate for their needs. As shown in the chart below, they could access this amount, linked to inflation, for up to 24 years and after 20 years when they are 92 they are projected to have 45% (or $431,000) net equity remaining in their home.4

If you’re in a similar situation to Barry and Helen and would like us to run the numbers for you, contact us today. You can either phone us on 1300 BOOSTNOW (1300 266 786) Mon-Fri, 9am - 5pm or click on the button below to fill in our online enquiry form also found at the bottom of this page.

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2 Currently, 66.5 years of age

3 The maximum PLS payment rate per fortnight is 150% of the full age pension rate less whatever age pension (or similar welfare payment) is currently being received

4 Projection assumptions: Property price growth of 3% pa; PLS interest rate of 4.50% pa; CPI of 2% pa, starting home value of $527,00; drawing $500 per fortnight (inflation linked) and spending all of the funds drawn.

*This excludes many retirement village ownership structures.