Treasurer Scott Morrison expected to announce incentives for the elderly to downsize the family home

Speculation is growing that the Federal Treasurer Mr. Scott Morrison will announce measures in the May budget that will encourage older Australians to downsize by selling their family home and enter retirement villages.

A recent article in the Australian newspaper included the following:-

"As well, the budget package will include measures that help boost the supply of housing for older Australians — such as villages for the over-55s — so more people are able to downsize without being forced to move far from their home suburbs or towns."

For some of these older Australians encouraged by these new government incentives will finish in what is referred to as the 'retirement village poverty trap'. A situation where the refundable amount due for repayment on departure is devalued by inflation and rising nursing home entry costs to the point where the retirement village resident is unable to move back into the property market or pay the entry cost to a nursing home of choice. This forces the resident who once had a substantial appreciating asset being the family home to go cap in hand to the taxpayer and seek a government funded nursing home placement, an impact Mr. Morrison has clearly not forseen.

If introduced as speculated these incentives have the capacity to send older Australians to financial ruin who then have to come back to the taxpayers for a government sponsored nursing home placement. This and other negative financial impacts of living in retirement villages are explained at www.retvill.net .

The following graph illustrates the problem for retirees, lifestyle versus the impact on capital wealth.