It seems that many people in the UK are thinking of downsizing in the next three years, almost half have decided that they will make the move and save on average £100,000 each. Almost half of these people have decided to downsize because they want to free up cash that is tied up in their property for their retirement whilst the other half want to reduce their monthly outgoings and their bills.
Lloyds bank carried out research and found that almost a decade ago the average amount raised by downsizing was £87,501 but this has increased to £97,722 in today’s market. However if you live in Greater London and decide to downsize you could raise as much as £272,000 by moving from a detached house into a more modest bungalow.
The survey also showed that a third of all downsizers asked had lived in their property for between eleven and twenty years with one in five having lived at their home for between twenty one and thirty years. Only 11% of the people asked had lived at their current home for five years or less.
Many people find downsizing quite liberating as long as they have thought the move through. It seems that a growing number of parents are downsizing now that the children have grown up and left home. People questioned as to why they are downsizing say that they do so to fund their retirement but also to cut their inheritance tax bill and some say so that they can help their children onto the property ladder themselves. Estate agency Savills believes that downsizers will release £12.5billion a year in equity by 2017 and it was residential homes that accounted for 34% of all of the inheritance tax raised in the 2009-2010 financial year. Inheritance tax is levied at 40% on assets worth £325,000 or more so homes in London and the southeast will be hit the hardest. For example in the southeast an average detached house is worth around £462,000 and in the southwest the average is £332,304 according to Land Registry, this equates to a lot of money going towards inheritance tax.
In 2012 alone 25% of Strutt & Parkers sales were to downsizers and they found that the highest number of downsizers were based in East Anglia, here 35% of all vendors were actually downsizing. It was a similar picture in the southeast and southwest where nearly a third of all house sales were by people who were moving home into a smaller property.
Those who are downsizing at retirement age and move into a much smaller property can have a healthy return, depending on your location. London obviously has the highest amount of equity released if you downsize from a four bedroom house into a two bedroom property, on average you can make £512,897 from the equity in your home. The southeast is next at £249,114 and the east of England is £206,343 whilst Wales is £147,411.
People who have actually taken the plunge and downsized have revealed intriguing insights into moving home to a smaller property than they have previously been used to. Below are some of the things that previous downsizers have learnt along the way when moving from a large family home into a smaller home with a lot less space.
Understand why you want to downsize: Some people do it for the money, others for the change in lifestyle or some because they find a smaller property a lot less stressful. Once your children have grown up and moved out there is sometimes far too much space just for the two of you and the thought of growing old and having to maintain a big house gets too much to handle.
Time the move correctly: Downsize when you feel it is right and when you are still in control of it. Make sure that the decision is yours so that circumstances do not force the decision upon you, for example ill health.
Don’t buy a house than is a mini version of your old one: If you are used to being in a big house don’t go for a smaller version of that house because it will just make you feel as though you are living a cramped existence. Instead go for something different that has large windows and lots of light, just fewer rooms.
A new beginning: Just like when you bought your first property and made a new life for yourself the same can be said for downsizing, it’s just that your dream has now changed somewhat. Downsize your home but upgrade your lifestyle by treating your new home to all of the mod cons that you may not have had in your old home, which makes life that little bit easier.
Use temporary storage: You will undoubtedly have a lot more things in your old home than you will have room for in your new one. So use temporary storage to store the things that you don’t really use on a daily basis. When you need it, go to the storage unit and retrieve it but after a few months if you find that there are things that you are never using then either sell them or donate them because they are not being used by you. Downsizing allows you to de-clutter your life and move on.
Enjoy the change: Don’t equate your move to the prelude to old age because it isn’t. Many people who downsize say how liberating it is for them and it becomes an exciting new chapter in their lives. Moving home is always a stressful time in anyone’s life but if you embrace this change in your life you will view the downsize as the start to something special.
We hope this post helps you in your quest to downsize, feel free to ask any questions or share this post with your friends.