Downsizing gathers speed as average ‘bonus’ topped £100,000 in 2014

publication date: Jan 23, 2015
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

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Downsizing gathers speed...

Lloyds Bank’s most recent Downsizers Report has established that trading down – and over 52% of homeowners planning to sell within three years want to downsize – can be very profitable, especially for Londoners. Moving down from a detached home to semi-detached earns homeowners an average £121,686, rising to £263,770 in London, and moving to a bungalow shows up as the most popular choice, freeing up an average £103,715, or nearly £289,927 in London. This is up 10% from 2004, so that moving from a detached home to a bungalow has increased homeowners’ profit by 8% or £8,081. Downsizing from a detached house to semi-detached reaps a windfall of 6% or £6,943 compared to ten years ago.

Smaller properties a better fit for changed circumstances
Nearly 63% of respondents said that downsizing suits their present lifestyle better, with 40% wishing to reduce bills and outgoings, 28% releasing equity and 25% shoring up retirement. Two in five of the 75% questioned were expecting to make money from downsizing plan to reinvest in a new build. A further quarter want to invest in other financial products, and more than one in ten see it as a way of bolstering their pension, or just giving some financial help to family members.

Lower living costs, health, relationships and amenities close by are important factors
26% also said they are looking for a less expensive area in which to spend their later years, compared to 21% only a year ago. Changes in health and relationship status, and being close to amenities, are also significant factors in the decision to downshift earlier than expected. The average downsizer’s age is 56 and moved into their current property at an average age of 39. Many of those have lived in their property for 11-20 years, and recognise that lowering household costs means that they can make the most of their retirement, or invest for the future. Lloyds Mortgages Director, Andy Hulme, comments that ‘the volume of downsizers is helping to keep the market moving, freeing up larger properties. Once people do look to trade down, the benefits are clear.’

East Anglia enjoys the best downsizing bonus for detached-to-bungalow moves
East Anglian homeowners moving from detached homes to a bungalow enjoyed the highest average rise in gains – 38% or £24,500 – in a decade, with the South West coming in at second place at 32% or £22,664. Third highest was Northern Ireland at 29% or £11,477.

South West downsizers win out on detached-to-semi-detached downsizes
Those moving from detached homes down to semi-detached in the South West saw the biggest general rise in average profit since 2004, coming in at 18% or £19,707. People in the North also enjoyed an overall increase of 15% or £37,367. However, London limped behind, at the bottom of the table, with a decrease in windfall of 12%, or £32,014, despite the fact that its downsizing ‘bonus’ in 2014 of £237,614 was the highest for that one year. 

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