Moving to a smaller property can be a heart-wrenching decision and you may find a host of reasons not to bother, but new research reveals that downsizing could be well worthwhile.
Figures from Savills for the Yorkshire Post show that if you swap a large, mortgage-free, five-bedroom plus home in Harrogate for a two-bedroom property in the same town, you could pocket over half a million pounds.
Naturally, those in the biggest properties in the best areas will benefit most from downsizing,though there are wide disparities throughout the county.
The average gain from selling a five-bedroom house in Yorkshire and buying a two-bedroom is £326,565, though in Hull, where values are lower, that falls to £137,048.
If you move from a four- to a two-bedroom home, the average gain in Yorkshire is £157,414. If you are in Harrogate that rises to £246,722 and in Hull it is £96,000.
Swapping a three-bedroom for a two-bedroom property will give a county average profit of £44,503, but in Harrogate it is close to double at £76,231 in Harrogate and in Hull it is £26,487.
Neal Hudson, Associate Director of Residential Research at Savills, says; “Moving to a smaller home after the children have flown the nest probably sounds a very sensible idea for many people. Not only will they be living somewhere cheaper and more manageable to run, but they are also likely to be able to release wealth that could help to fund their later years or be passed to younger family members trying to get on the housing ladder.
“Indeed, retirees and those 55-plus, who are approaching retirement, have a great deal of equity tied up in their homes. Our analysis suggests that in total, two-thirds of all the wealth tied up in owner occupied homes is held by this age group.”
According to the Survey of English Housing, there has historically been a surprising level of resistance to moving among older people, despite the fact that half of over-55s have a bigger home than they need.
Those in their retirement years account for just 6.5 per cent of all home movers each year and downsizing tends to be triggered by a life event that highlights the need for a smaller property.
Until then, elderly people may be deeply resistant to leaving the family home and the neighbourhood, according to a 2009 report by the Centre for Housing Studies.
However, downsizers of all ages now drive 22% of prime London sales and 38% of those in the prime regional market.
Downsizing by at least two bedrooms in the South East brings the greatest rewards. A move from a five- to a three-bed home there would release an average of over £450,000 and that figure will rise significantly if you move from a high value area to one where average prices are lower.
This is one of the factors driving retirees from London and the South East to Yorkshire’s coast and Wolds.
The trend towards downsizing in general is likely to gain momentum as parents increasingly tap into their equity to help their children on to the housing ladder.
Neal Hudson says: “Already, over the past five years, our figures show that first time buyers have received two or three times as much parental help with their deposit as they did before the financial crisis.
“It’s interesting to compare the amount of cash released by a mainstream move from a three- to a two-bedroom property with the average deposit needed by a first-time buyer. Although there is some regional variation, this comparison indicates such a move would release equity worth two to three times the size of the deposit needed.
Even away from the upper end of the housing market, downsizing by parents could be a Godsend for first time buyers that helps to fuel sales in the lower echelons.”
This is likely to underpin an increase in downsizing, says Savills. It calculates that 55,000 homeowners now downsize each year, releasing equity of around £7 billion. Over the next five years, it believes that the figure will rise to 90,000 households moving down the property ladder to release equity of around £14.6 billion.
Other good reasons to go smaller include lower energy bills and less maintenance, although those who decide to stay put often say they are waiting for prices to rise back to their 2007 height and perhaps beyond. They may have a long wait for that.
Savills believes that while London will see a 21 per cent growth in house prices by 2017, Yorkshire may only manage around five per cent.
Average house prices should stabilise this year, they say, but will struggle to show inﬂation-beating growth for the foreseeable future.
The forecast for Yorkshire is for a stagnant 2013 with no growth, a drop of 0.5 per cent in 2014, a rise of 0.5 per cent in 2015, a 2.5 per cent increase in 2016 and a three per cent rise in 2017.