Downsizing on the rise as living costs soar

There was an increase in homeowners downsizing to a smaller property last year, driven by record energy bills and the cost-of-living crisis.

Defined as those moving to a home with fewer bedrooms than the one they are selling, downsizers comprised 17% of all home movers in January 2022 and the proportion rose steadily throughout the year to account for almost a quarter (24%) of all home moves by December, according to home-moving website Reallymoving.

The data is based on around 55,000 conveyancing registrations.

"While homeowners have historically chosen to remain in family homes for as long as possible to avoid the cost of moving and stamp duty bills, record energy prices and inflationary pressures are encouraging them to reassess," the report said.

UK households have seen huge increases in their gas and electricity bills, and inflation remains close to a 40-year high.

On average, downsizers released 18% of their equity by moving to a smaller home last year. This equates to £86,000, with the typical downsizer selling a property for £481,000 and buying for £395,000.

£205,000 windfall

Estate agency group Jackson-Stops has seen a 21% increase in downsizing enquiries since 2019.

Tim Firth, director of Jackson-Stops Weybridge, said that many downsizers had told him they had been considering it for a while, and the prospect of heating and maintaining a four- or five-bed home during an energy crisis had been the push they needed to finally make the move.

Based on average prices across the UK, downsizing from a detached home to a semi-detached home could leave movers with a windfall of £205,157, an increase of £44,226 since 2020, according to Jackson-Stops. Almost £600bn in equity could be released if all potential downsizers moved to a smaller property.

Pension boost

Reallymoving chief executive Rob Houghton expects the increase in downsizing activity seen in 2022 to continue throughout 2023.

"Many older homeowners have paid off the mortgage on their family home but may still be struggling to deal with the rising cost of living, especially if they're retired and on a fixed income, and the end of the energy price guarantee is approaching in April," Houghton explained.

"Following strong price gains over the last few years, moving to a smaller home will give most people a good chunk of cash and put them in a very strong position to negotiate a favourable price on their next home, perhaps as a cash buyer.

"It could also boost their pension pot, enable them to help family members financially or take care of large one-off purchases such as a new car."