Downsizing Could Free Up over £100,000
New research has found that almost 50% of homeowners who are considering moving in the coming three years are planning to downsize, and many of these are doing so for practical or financial reasons. The amount of capital that you can release by downsizing will depend on your property and the area that you live in, but this could be more than £100,000 in many instances.
The research from Lloyds Bank highlights that those living in detached properties could make an average of £117,230 if they moved to a semi-detached house - maybe one with a practical straight staircase - and those in London could walk away with a staggering £201,052 by relocating to a smaller property.
We often think of downsizing as something that retired homeowners do, but the study shows that those moving are typically much younger than this. The age of those moving to a smaller home is on average 53 years of age, and 37% of those people had lived in the property for 11 to 20 years.
20% of those surveyed were downsizing earlier than they'd expected to due to relationship or heath reasons, to move closer to local facilities or to live in a more affordable neighbourhood.
Why Make the Move?
There are many reasons why homeowners choose to downsize, but for the majority this is to get a more suitable property that will meet their needs as they get older - maybe because they need a more manageable straight staircase or to live in a bungalow.
Many of the homeowners also want to move for financial reasons, with 39% looking to free up equity or reduce their bills, and 21% wanting to use the extra cash to fund their retirement.
75% of those who took part in the research expect to make a profit from moving, and 35% want to reinvest this in their new home. However, 29% want to invest the money in other financial areas, and 21% will put it into their pension or use it for their family.
The Importance of Downsizing
The property market needs this group of homeowners to downsize in order to keep it healthy and buoyant. As they move out of large family homes, it frees up the properties for younger families and enables them to move up the property ladder.
We generally think that people should move to larger homes as they go up the housing ladder, but as priorities and circumstances change this is not necessarily the right type of move. If everyone kept hold of their proprieties, even when their children had moved out, it would reduce the number of family homes available and cause the housing sector to stagnate.
Not everyone who is looking to downsize wants to do so for financial reasons, but this is clearly a significant factor in the decision, even if it isn't the primary focus. With such large profits to be made from taking on a smaller property, it could be a way of releasing funds rather than having them tied up in a house.