Pensioners are being given further concessions to encourage them to downsize and free up thousands of houses for younger families looking to buy.

The new federal laws reduce the impact selling a house has on the payments pensioners and other welfare recipients receive.

The current 12-month asset exemption test for the amount of money from the house sale that will go towards the new home will be doubled to two years from January 1.

The changes will give people more time to buy, renovate or build their new homes without worrying their welfare payments will be impacted.

More than 8000 people on income support took advantage of the 12-month exemption last year.

Real Estate Institute Queensland CEO Antonia Mercorella said the measure had the potential to free up thousands of homes.

“Analysis commissioned by the Treasury department found that with the right incentives in place, as many as 50,000 properties currently occupied by senior Australians could be freed up for younger buyers,” she said.

“We think everyone would prefer to see properties freed up for growing Australian families, rather than seeing pensioners feeling financially stuck in properties they aren’t fully utilising.”

She said high transactional costs were one of the reasons older Australians were reluctant to sell and held on to their properties for far longer than is ideal for their circumstances.

Social Services Minister Amanda Rishworth said it was an important piece of legislation to help pensioners downsize.

“This will provide real support to older Australians facing cost of living pressures,” she said.

-AAP