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Investing in your own home
Many New Zealanders see their own home as part of their retirement plan.
The theory is, that once the kids have flown the nest, and the mortgage is paid off, it will be nice to be in something a little smaller.
"Why not sell the big house and trade down to something with a little less lawn. We can use the difference to fund our retirement."
the Shape of Money doesn't intend to question the validity of this concept, as in the past it's proven a successful savings and investment strategy. However, we feel obliged to draw your attention to several areas of concern.
Essentially, we see a potential situation arising in which many people will be trying to sell their large houses in a housing market that needs smaller accommodation. And, conversely, many people will be trying to buy their ideal retirement home in a heavily crowded buyers' market.
We believe it's important to understand the potential implications and risks of relying on trading down as the major source of your retirement funds.