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A pilot program to assist senior Australians to downsize their home without affecting the age pension will be welcomed by some retirees but the vast majority will be disappointed by the limitations of the scheme, as they want to stay where they are rather than sell and move away.
From July 1 2014, those claiming the age pension and who have lived in their current home for at least 25 years, can downsize and invest the additional funds, capped at $200000, in a special account. The funds invested and any interest earned will be exempt from asset and income testing for up to 10 years.
Although we welcome any initiative that is intended to improve choice for senior Australians seeking to access their housing wealth in order to fund their retirement, the appeal of the Government’s Housing Help for Older Australians’ pilot is likely to be somewhat limited as it does not address the overwhelming desire of retirees to remain in their homes.
The Australian Bureau of Statistics reports that 75% of Australians aged 65-74 and 82% of those aged 75 and over own their home outright. According to the Australian Institute of Health &amp; Welfare, outright homeowners are more likely to intend to age in place and exhibit the highest levels of satisfaction with their housing.
The key challenge for retirees seeking to improve their standard of living is to release some of their home equity wealth without selling their home and then having to move away from established and supportive social networks.
Domacom has emerged as the first provider of long awaited "Second Generation" Equity Release products, which will improve the range of equity release strategies available to the so-called, Asset Rich but Cash Poor retirees who have previously had little choice beyond bank-funded Reverse Mortgages. Compounding the problem, the number of Reverse Mortgage providers has fallen dramatically since the Global Financial Crisis. 
The MoneySmart website hosted by the Australian Securities and Investment Commission suggests that using home equity may be suitable if “you need a lump sum for home maintenance or renovations so you can stay in your home” but warns that “using your home equity is a big step”. ASIC also advises consumers to work out whether the benefits outweigh the risks and always seek financial advice before making a decision.  
Domacom has taken an important decision introduce a mandatory requirement that clients obtain both financial and legal advice, in order to increase consumer protection.
Given that home ownership represents about 70% of Australians’ personal wealth and that the number of Australians aged 65 and over is predicted to double by 2031, home equity release options are likely to stay on the agenda for government policy developers regardless of the 2013 election outcome.
Arthur Naoumidis is chief executive of <a target="_blank" href="https://www.domacom.com.au/">Domacom</a>
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Arthur Naoumidis

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