Sea change or tree change? A cost-benefit analysis to making your lifestyle choice.

2020 has certainly changed the way we live and work. In the past, a sea change or tree change was something to consider when you are ready to retire and are not so reliant on living in close proximity to your work. With working from home the new norm, people are reconsidering where they live, their cost of living and thinking about ways to improve their home living environment which now doubles as their work environment.

Sea change or tree change? Which would you choose?

In Australia, a sea-change has traditionally been a more popular choice, with coastal regions on the outskirts of the major cities the ideal locale. For Sydneysiders, areas such as the Central Coast (Avoca, McMasters Beach and Terrigal), mid-north coast (Coffs Harbour, Port Macquarie and Port Stephens) and South Coast (Wollongong, Kiama and Gerroa) are in high demand. For Melbournian’s, areas such as Geelong, Mornington Peninsula and Great Ocean Road (Apollo Bay, Lorne, Warrnambool) are very desirable.

Many are also considering more dramatic and distant moves further afield to coastal areas such as Queensland’s Sunshine Coast, Western Australia’s Margaret River region, South Australia’s Fleurieu Peninsula and Tasmania’s east coast.

A tree-change is often a more affordable, family friendly option with larger land and accommodation options available as well as the attraction of living in a close-knit community. The Australian recently published an article outlining the top Australian locations hitting the spot when it comes to a financially viable lifestyle choice. Areas that came out on top included; New Norfolk in Tasmania, Clare Valley in South Australia, Mudgee in New South Wales and Ballan in Victoria.

We asked our Tribel advisers which choice has been most popular with their clients and it appears that it is fairly evenly split across Australia with some clients choosing areas that offer bushland surrounds not too far from the sea.

After doing the maths and analysis, each clients’ situation is very different, but all needed to consider the same financial factors.

Practical and financial costs to consider making a sea change or tree change

Depending on your stage of life, you will of course have many things to consider:

• “Try before you buy” – consider renting in the area before you buy.
• Consider purchasing two properties in the new area (one can generate income to fund the other).
• Consider keeping your property in the higher capital growth area, renting in the new area.
• Consider the tax implications of each option.

What are the financial benefits of the move?

When considering the option of a sea change or tree change, some interesting benefits can present themselves, depending on your current financial situation.

These include:

• An opportunity to unlock wealth from selling your existing family home to purchase a much more affordable home and reduce your debt.
• Earning rent if you decide to keep your city home that can offset your rent in the area you move, plus potentially (depending on rental returns) produce a positive income.
• A potential to buy two properties for the price of one and generate a retirement income.
• Less maintenance, increased retirement savings, more time for hobbies.
• Downsizing provides an opportunity to contribute a downsizer contribution to your super and tax-free account based pension fund.
• Lower costs of living including council rates and electricity rates.

There are various scenarios that come into play when making these decisions. Your age, your income opportunities, family structure, assets and liabilities. Your individual financial situation needs to be taken into consideration when planning a sea change or a tree change.

For those lucky enough to have made significant gains on property, the question of when is the best time to sell and/or whether you are in a position to hold on to both properties all needs to be considered.

You may be concerned about risking losing wealth, however, keep in mind the importance of lifestyle; there needs to be a balance at different stages of your life in terms of wealth retained and money well spent on lifestyle improvements.

For most people the decision of making a sea change or a tree change is usually about trying to improve your life, your physical and mental wellbeing and your financial wellbeing. We recommend that you visit your Tribel adviser if you are considering this as an option. We can help with professional advice on your particular situation before you choose to sell or hang onto your property and before leaving the big smoke for greener pastures.