DownsizingIn a Buyer'sMarket

For Australians considering downsizing, a changing property market can create an opportunity that is easy to overlook.

Normally, downsizers face a familiar dilemma: do I sell first and risk not finding another home, or buy first and risk carrying two properties?

But as the Australian property market shifts and buyer demand softens, there is another strategy worth considering.

Sell first. Take your time. Then become the buyer.

The balance between buyers and sellers is beginning to shift.

Recent Equifax data reported by News.com.au shows Australian mortgage demand fell 12.5 per cent in the year to June 2026, the largest decline since the COVID period.

Higher interest rates have reduced borrowing capacity and some first-home buyers and investors are stepping away from the market.

That matters because property prices are ultimately influenced by competition.

When ten serious buyers are chasing a property, the seller has the advantage.

When there are only two or three, suddenly the buyer has considerably more negotiating power.

We are also seeing signs of this changing sentiment here in Adelaide. Recent Domain data recorded Adelaide auction clearance rates of 42 per cent for the week ending 11 July and 52 per cent the following week, compared with 76 per cent and 69 per cent respectively at the same time last year.

That doesn't mean every property is falling in value, nor does it mean every suburb is a buyer's market.

Quality homes in tightly held locations can still attract strong competition.

But the market is becoming more selective, and that can create opportunities.

One of the biggest advantages many downsizers have is equity.

After owning a family home for 20, 30 or even 40 years, they may have little or no mortgage remaining.

That can put them in a very different position to a first-home buyer or heavily financed investor.

Rather than needing to borrow hundreds of thousands of dollars at today's interest rates, a downsizer may be able to sell their existing home, release substantial equity and approach their next purchase with cash or a very small loan.

And in a softer market, cash and patience can be an extremely powerful combination.

This is where the current market becomes interesting.

Imagine selling the family home for $900,000.

Instead of immediately purchasing another property because you feel pressured to stay in the market, you arrange temporary accommodation and wait for the right opportunity.

You now have something many other buyers don't have: time.

You can watch. You can negotiate. And you can walk away.

If a property has been sitting on the market for several weeks, has passed in at auction or the owner needs to sell, your position suddenly becomes considerably stronger.

A home advertised at $700,000 doesn't necessarily have to sell for $700,000.

Perhaps you negotiate it to $670,000.

Perhaps another property that would previously have attracted six competing buyers now attracts only two.

The opportunity isn't necessarily about waiting for the entire Australian property market to crash. It's about waiting for the right property and the right seller.

There are other potential financial benefits.

According to the Australian Government's Moneysmart service, downsizing can free up cash, reduce household expenses and maintenance, allow debt to be repaid and give people the opportunity to move somewhere better suited to their lifestyle.

For eligible Australians aged 55 and over, there can also be superannuation opportunities.

Under the downsizer contribution rules, eligible homeowners may be able to contribute up to $300,000 from the proceeds of selling their home into superannuation. For a qualifying couple, that can potentially mean up to $600,000.

Eligibility rules apply, so appropriate financial and taxation advice should always be obtained before making a decision.

For retirees receiving or expecting to receive the Age Pension, selling the family home needs to be considered carefully.

Your principal residence is generally excluded from the pension assets test, whereas money held after selling can ultimately affect your assessment.

However, where sale proceeds are intended to purchase, build, rebuild, repair or renovate a new principal home, Services Australia provides an assets-test exemption for qualifying proceeds for up to 24 months, with an extension to as much as 36 months available in some circumstances.

That can provide downsizers with some breathing room, but individual circumstances vary and professional advice is important.

For many people, the family home represents decades of memories.

Downsizing shouldn't mean rushing from one property into another simply because settlement day is approaching.

A softer market can potentially give downsizers something incredibly valuable: choice.

Sell the larger home while it still appeals to families who need the space.

Release the equity.

Remove the pressure of having to coordinate two settlements.

Then approach the market from the other side of the negotiating table.

You are no longer the homeowner wondering whether someone will buy your property.

You are the buyer deciding which property deserves your money.

And when there are fewer buyers competing with you, that is a very different position to be in.

Nobody can reliably predict exactly where property prices will be in three, six or twelve months.

Waiting also carries risks. Prices in your preferred suburb could rise, the perfect property could appear earlier than expected, and renting or temporary accommodation creates additional costs.

That's why downsizing should not simply be a bet that house prices will fall.

Instead, it can be about creating flexibility.

In a strong seller's market, buyers often have to make quick decisions and compete aggressively. In a buyer-friendly market, patience becomes an asset.

For the right downsizer, selling first could mean having the money available, having fewer conditions attached to an offer and having the freedom to negotiate when the right property finally appears.

Sometimes downsizing isn't simply about moving into a smaller home. It's about putting yourself in a stronger financial position for the next stage of your life.