Reducing your living space can enhance retirement finances and property market value

Downsizing to a smaller, more energy-efficient property can bring substantial benefits for homeowners, according to recent research. The average savings on energy bills for homeowners moving to a smaller property can amount to an impressive £3,806 per year.

Regions such as the North East offer the highest proportionate return for downsizers, with homeowners recouping 65% of their five-bedroom property value. London movers, on the other hand, could release the most in pure cash terms, with an estimated £1,062,087 for those who own their properties outright.

However, the process of downsizing is not without its challenges. A shortage of houses and limited land in urban areas, along with costs associated with stamp duty, legal, and conveyancing fees, can deter many homeowners.

The estimated monetary difference for an owner relocating from a five-room to a three-room apartment varies significantly depending on location. In London, the price difference per square meter between a five-room and a three-room apartment can be approximately £6,500, while outside London, prices are lower but still vary by area. This means that the amount freed depends on the specific location and size, but can be several hundred thousand GBP in Greater London suburbs.

Another issue faced by downsizers, particularly the elderly, is finding suitable smaller properties in their desired location. Emotional ties and the inconvenience of moving can also deter older homeowners from downsizing.

Experts suggest that older homeowners in large family homes should be encouraged to downsize to free up stock for buyers further down the property ladder. This would not only boost property supply but also release useful income for retirement, especially with the typical cost of a comfortable retirement now at £43,100 a year.

Regions outside London, such as the East Midlands, South West, and East of England, still offer a significant cash return for downsizers, with downsizers in these regions able to unlock 58% of their five-bedroom property value.

The average property price for a detached property in the UK has grown around 83% since 2005, reaching £440,000. Homeowners who purchased their properties in 2014 have experienced an average 36% increase in the value of their property.

Despite these benefits, as people age, they become less likely to want to downsize and uproot their lives. Reducing or removing stamp duty could incentivize downsizers to move, making the process more appealing for those considering it.

In conclusion, downsizing offers significant savings on energy bills, the potential for substantial cash releases, and the opportunity to free up property stock for first-time buyers. However, the process is not without its challenges, and addressing these issues could make downsizing a more attractive option for homeowners.

Reducing your living space can enhance retirement finances and property market value