I called a highly competitive auction on Saturday with 316 bids.
There were four bidders, with the final two bidding mostly in $1,000 increments for the last quarter of a million dollars.
Both were downsizers and both were highly motivated to secure this single level, north facing home with a double garage (tick, tick, tick for downsizers).
While it is presumptuous to say that all downsizers have deep pockets, it’s largely true.
By definition, downsizers (typically Baby Boomers and Gen X “empty nesters”) own or have recently sold a large home (often debt free) and are buying back in at a lower price point.
They are equity and cash rich and often don’t require finance so are immune to higher interest rates, and in fact benefit from them.
If they bought a family home in the early 1970s in the Inner East and held it ever since, it could be worth 100 times what they paid. $30,000 into $3,000,000. Tax free.
Millennials and Gen Y’s find it hard to compete with Baby Boomers and their deep pockets.
Young professionals and families tend to borrow up to 80 percent of the purchase price. With mortgages currently being assessed at eight or nine percent serviceability, you really must be in the top one percent of earners to be able to afford a family home in Stonnington and be willing to take on a huge amount of debt.
Many of our strongest results of late have been competitive auctions with two or more Baby Boomers bidding – either for themselves or for their kids.
When you’ve just sold your family home in Malvern East for $5,000,000 and really want to be close to Glenferrie Road in Armadale or Malvern, there isn’t a lot of choice. Particularly when you have some non-negotiables like garaging, north facing and single level living.
And if you aren’t open to (off-the-plan) apartments, that even further limits your choice.
Hence the stiff competition for properties that tick the boxes for downsizers.
Nevertheless, it is a promising sign for the market that downsizers now have the confidence to buy and sell.
As the most conservative and patient demographic of buyers, market conditions need to be favourable to get downsizers to move.
Feature Property: 29 Stuart Street, Armadale
David Sciola 
Very thought-provoking, as always, David. The phenomenon of the cash buyer, who is often a downsizer, is one that you have written about before. Unlike young professionals, cash buyers would presumably not be reliant on earning an income to remain in their homes. If we do see a significant uptick in unemployment – and the RBA is forecasting a 1% rise in the unemployment rate over the next 2 years – it will be interesting to see if smaller, downsizer-friendly homes in Stonnington perform better than similar homes in less established areas where buyers are dominated by young professionals. Of course, such a comparison would be complicated by any rate cuts that might occur over the same period, which would benefit young professional buyers more than downsizers.