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A big home has its advantages, but what happens if that space becomes a burden. Perhaps the children have flown the nest, or you find yourself alone after a divorce? Perhaps you’re travelling more than you used to and are hardly at home.
For some, there comes a point where space is no longer a luxury but a costly hassle. Downsizing to something smaller with no garden may be just want you need to make your life simpler. Before you take that leap though, here’s what you need to consider.
Money savers – the advantages
Downsizing your home could save you a lot of money. You could pay less on home loan repayments, rates and taxes and, according to Absa, you could pay less on your monthly bills as a smaller home uses less electricity and water.
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Shaun Roos, managing director at Longitude Developments, concurs: ‘Downsizing from established homes with large grounds saves money. Older builds are costly to maintain.’
Roos advises those who are keen on downsizing to consider buying a new build. ‘Downsizing to a new build offers modern architecture and energy efficiency,’ he adds.
Money matters
Calculate how the various options will affect your future monthly budget by comparing things like monthly municipal rates and sectional title levies, maintenance requirements and utility costs.
‘For instance, a two-bedroom apartment in a retirement complex might cost between R1.5 and R2 million – with an additional levy of up to R8000 per month. However, this usually covers everything but the telephone rental and the electricity and includes facilities such as 24-hour manned security, a swimming pool, gym equipment and frail care at a reduced rate,’ says Dawn Bloch, area specialist for Lew Geffen Sotheby’s International Realty in Zwaanswyk, Lakeside and Kirstenhof.
She adds: ‘A similar apartment in normal complex can often be found for the same or even less depending on location, but when you consider the costs of water, electricity, security, maintenance and escalating municipal rates, monthly expenses can easily amount to much more.’
What to do with windfalls
Downsizing may result in you earning a sudden windfall, particularly if the money you get from your property is more than the outstanding home loan that you owe. It’s wise to use any funds from the sale to pay off your home loan. The rest should either be used to buy your next home, invested, or saved.
Consider your pension or annuity – does it need a top up? If so, speak to your financial adviser to find out how you can make the most out of any lump sum that you get from the home that you sell.
Roos adds that a buy to let investment may be something to consider. ‘Buy to let is a great investment in Johannesburg. Foreign embassies, consulates and big corporations are always looking for high end accommodation for employees, especially in the current fiscal environment.’
Roos highlights the value of advice, adding: ‘Don’t be shy to syndicate with like-minded individuals with similar investment requirements. Invest in several properties and ensures that your rental stock is managed by a professional property practitioner.’
Consider pros and cons
Downsizing has many advantages. It can free up capital, reduce the hassle of maintaining spaces like gardens and save you lots of money. But there are downsides to consider as well.
If you downsize to a home further away from your work and you’re not allowed to work from home (WFH) the saving you may make on home loan repayments may not be worth it.
Grant Smee, managing director for Only Realty & CEO of Frankie Bells, explains: ‘If you are moving, then you need to weigh up the cost of petrol vs. your proximity to work. If you work in Sandton but have found a cheaper home in Roodepoort, then you would need to work out how much extra you will spend on petrol. This is vitally important to ensure that you are saving.’
If you intend, for example, to carry on with a certain hobby or sport consider the impact downsizing may have on this. Roos says: ‘Bear in mind that you’re downsizing in structure, but your lifestyle is not downsizing. Think about storage for sport equipment, hobbies and pets and look for the right kind of property that offers lifestyle benefits.
‘Consider your lifestyle and your needs very carefully when making this decision. Look for a property that offers outdoor spaces or communal fitness areas or gyms and a property that allows you to customise your interiors.’
If you get the downsizing exercise right though, it can free you up to do the things you’ve always wanted to do. Bloch adds: ‘Compact homes generally require less maintenance, which means homeowners can get out and enjoy life rather than spending weekends mowing the lawn. As most people usually opt for homes in complexes or estates a greater level of security offers peace of mind.’
