A third of over-55s want to downsize

ONE in three homeowners aged 55+ (32.6 per cent) are considering or expect to consider downsizing, according to a new study from the International Longevity Centre – UK (ILC).

This figure rises to nearly one in two of all homeowners aged 55+ (48.2 per cent) when factoring in those who have already sold their home and bought somewhere smaller (15.6 per cent).

The study suggested more than half of people in London and 42 per cent in the southeast expect more than £100,000 of equity could be released through downsizing, underlining the boost from house price growth to the finances of older generations.

The top reason (56 per cent) for downsizing was that small homes require less maintenance.

Just under a third (29.3 per cent) wanted to downsize as a way to release equity, with 19 per cent managing to release more than £100,000.

Of those who did release their equity, over a third (35.2 per cent) put the money into a savings account while 34 per cent of people aged between 55 and 59 added it to their pension pot.

The ILC also highlighted the “substantial but unmet demand” for downsizing in later life, where lack of both suitable homes and specialist retirement properties are putting some homeowners off the move.

Looking at ways to make downsizing a more attractive option, it stated a greater number of older people might be encouraged to move if the government waived stamp duty for purchases of retirement accommodation above a certain age limit.

David Henderson, at Strutt & Parker in Moreton in Marsh says: “The Government has focused a great deal on helping first time buyers in recent years, but more needs to be done to help downsizers in later life. If we can find a way to allow older people to downsize more freely, more family homes will come onto the market and help to ease the UK’s housing shortage.”

Stephanie McMahon, Head of Research at Strutt & Parker, agrees: “An implication to the recent changes to Inheritance Tax could mean that older people with larger homes could be discouraged from downsizing later in life – therefore not freeing up larger family homes that are in high demand and short supply. Under-occupation in the UK is a big issue and this could potentially exacerbate the problem.

“Mr Osborne has tackled this by making sure that if someone downsizes before they die, their tax-free exemption will stay at the value of the house that they sold – which reduces the disincentive to downsize, but may not remove it entirely for those expecting the value of their home to increase who wish to pass as much wealth as possible onto their families.”