A downsize is usually more about lifestyle than squeezing the last drop of capital gain from the move. Photo / Getty Images
There comes a time in life when some people want to downsize to a smaller nest. Their children have left home or they are becoming less able to do those DIY jobs they used to enjoy. Some empty nesters move to a "lock up and leave" to go travelling.
There are many reasons to downsize. The two most common says Paul Foster, senior sales partner at Iron Bridge Real Estate, is for lower maintenance and to free up equity.
In many cases the downsize also releases the owner from a mortgage, enabling them to actually retire.
There is no one-size-fits-all home for downsizers. The solution could be an apartment, a unit, or a low-maintenance new build.
Location for downsizers is important. Though they might be fit and healthy when they first downsize, people do age and may find that the steep hill up to the shops, or the lack of public transport to be a problem.
Even the steps from the front door down to the street could be an issue in the future if the owner's mobility deteriorates and they need a motorised scooter to get around.
Many Auckland downsizers are now choosing to move out of the city to maximise the equity withdrawals from their homes.
The location may be near their offspring or in a retirement spot such as Tauranga or Orewa.
If you're moving to another centre, says Foster, it's a good idea to consider whether the prices in that centre are trending up or down.
If they're rising faster than they are in Auckland, the move should be done sooner rather than later.
It is, however, notoriously difficult to time markets, and a downsize is usually more about lifestyle than maximising capital gain .
A common complaint for downsizers, says Foster, is that by the time they look at costs to get to a smaller property, they don't necessarily have enough money left from the changeover.
As a result it's a good idea to underestimate how much you will walk away with from your existing property and overestimate the cost of buying.
A downsize is usually more about lifestyle than squeezing the last drop of capital gain from the move
It's important as well to factor in agents fees, staging and removal costs and any work you need to do on the new house.
Choosing the downsized home can be difficult. Invariably it's a single-level property. Type in the word "retirement" into Realestate.co.nz and it returns an awful lot of two bedroom units.
Another option some empty nesters choose is to move into a retirement village. Homes in these villages range from standalone bungalows through to small apartments.
There are in excess of 28,000 such units in New Zealand housing 36,000 people. About 12.4 per cent of people aged 75-plus live in these villages, according to the latest JLL New Zealand Retirement Village Database.
Though many residents couldn't be happier with their choice of downsized nest, potential buyers do need to be aware that the majority of such units have a "licence to occupy" tenure, which means you don't technically own your own home.
Solicitor Carolyn Ranson of Smith and Partners says more than half of such units are sold using the licences. Buyers do not receive any capital gain on their units.
The full purchase price, she says, includes a "membership" or "amenities" fee of 25 to 30 per cent of the purchase price.
This means if you stay more than about three years you automatically lose this amount of your equity if you die or need to move on.
In addition there will be regular (usually monthly) village outgoings fee. And there are other costs.
Village life can be like living in a resort. On the flipside there can be restrictions on things such as keeping pets, or even having your children and grandchildren come to stay.
It's both compulsory and essential to get independent legal advice regarding the exact contract you are signing.
Another option popular with some families is to buy a joint property with your children and live in a separate flat or minor dwelling.
This can be a win-win for all the generations involved, says Foster.
It does require careful legal planning to cover eventualities to ensure your offspring aren't forced to sell if you need to go into care or you die.
Otherwise they could end up squabbling over the inheritance with their siblings and find themselves homeless in a worst-case scenario.
Or, if you really don't want to move, but need the money, a reverse equity mortgage is an option if you are mortgage-free.
Ranson points out that the interest on reverse equity mortgages is typically higher than a standard mortgage and because there are no repayments while you're still living in the house, the debt compounds, eating into your equity.