Downsizing driving the homemover market
Just over half (51 per cent) of potential homemovers are looking to ‘downsize' within the next three years, compared to just a fifth (22 per cent) looking to trade up to a larger property, according to the latest research from Lloyds TSB.
Reasons for trading down
For homeowners reaching retirement it is common to consider downsizing to a more manageable home. Lloyds TSB's report however, found that the reasons for downsizing have broadened in these tough economic times. Whilst 59 per cent want to move to a smaller property that is better suited to their circumstances, a third (33 per cent) of potential downsizers would like to move to a smaller property to help reduce bills. Almost two fifths (37 per cent) would like to free up equity in the property and almost one in three (30 per cent) said they want to downsize to help support retirement plans.
A fifth (21 per cent) of those considering downsizing are looking to trade down earlier than expected, with the majority citing financial concerns as the key driver. Comments from those surveyed included:
"The cost of living is making it hard to maintain this house in this location".
"To help save money on bills".
"Because of financial worries".
Downsizing no longer just for ‘empty nesters'
Whilst older homeowners are still playing a key role in the downsizing market, the research highlights that homeowners of different ages are now considering it as an option. Unsurprisingly over 60 per cent (63 per cent) of potential downsizers are over-55s but over one in four (28 per cent) are aged between 46 and 55 and over five per cent are aged between 36 and 45.
Homeowners at different stages of the property ladder are also looking to downsize to a smaller property in the next three years. Almost half (49 per cent) of homeowners living in their second home are considering trading down, as well as 61 per cent of homeowners in their third home and the same number (61 per cent) in their fourth home.
The report showed that over two thirds (68 per cent) of homeowners considering downsizing have lived in their current property for over a decade. However, one in five (20 per cent) have lived in their property for between six and 10 years and over one in ten (12 per cent) have lived in their property for only five years or fewer.
Stephen Noakes, Mortgage Director, Lloyds TSB comments: "Downsizers are now playing a key role in the housing market and as the study shows we are starting to see homeowners on different stages of the property ladder considering it as a sensible option as more and more families are looking at ways to save money.
"Whilst we have seen a significant rise in the potential cash windfall, downsizing can make a lot of sense for a wide range of people, it is important to consider carefully whether trading down is the best solution. Whether you are looking to lower utility bills, pay for an offspring's tuition fees, or free up extra cash for retirement we recommend you seek professional advice before taking action."
Downsizing windfall for retirees reaches almost £100,000....
Those looking to trade down later in life have seen their potential cash windfall rise by more than 40 per cent over the past decade. Trading down from a detached home to a bungalow would have earned an average windfall of £97,298 in 2012; an increase of 41 per cent (£28,484) since 2002.
Regionally, Yorkshire and Humberside (84 per cent) saw the biggest increase in the average windfall, followed by the South West (71 per cent). In monetary terms, Londoners typically receive the highest windfall (£269,415) from trading down.
....and exceeds £120,000 for those trading down early
For those trading down early; the windfall associated with downsizing from a detached property to a semi-detached property has risen by 46 per cent over the past decade. A downsizer today would receive an average windfall of £120,359; compared with £82,412 in 2002.
Other key findings:
45 per cent of potential downsizers currently live in a detached house and the majority (80 per cent) have three to four bedrooms.
Almost half (44 per cent) of downsizers plan to move to a bungalow.
Half (50 per cent) of potential downsizers believe a third stepper will buy their home, whilst 45 per cent believe homeowners in their second home would be most likely to purchase their house.
Three quarters of potential downsizers (74 per cent) expect to make a profit when they sell their property.
Over a third (36 per cent) plan to invest that money into a new property, over one in ten plan to pass it down to their family and a similar number plan to top up their pension (12 per cent).