The Pros and Cons of Downsizing
Does downsizing work for empty nesters? The logic seems plain enough. Free up cash to spend enjoying your senior years, and reduce the level of upkeep to a property that has more space than you need. You can even move to a property that suits the challenges of advancing years more closely.
But it’s more complicated than that. Here’s why.
Pros of Downsizing
Let’s look first at the positives of downsizing.
Financial Gains
One of the most compelling reasons to downsize is the potential release of cash. How much varies of course according to the value of the property being sold and bought. Anyone downsizing in London is likely to realise a large amount, and if they are moving to a cheaper area this could be a highly lucrative decision. Downsizers could make a useful profit that can be added to retirement savings – especially helpful when you consider what is calculated to be necessary for a comfortable retirement.
Lower Household Expenses
Downsizing can lead to lower household bills, particularly if the new home is more energy-efficient. This could be in terms of thousands of pounds a year, which again will boost available cash for retirement spending.
Easier Maintenance
A smaller home is generally cheaper to maintain, both in terms of physical upkeep and cleaning. If people have lived in a property for some considerable time, they may not have kept up with regular maintenance, and the sudden need for a new roof, for example, could be very expensive. Other tasks that may have been carried out by the homeowner may become onerous as time goes on, which could mean bringing in paid help with cleaning or gardening – again an added expense in a large house.
Lifestyle Benefits
Many people combine downsizing with moving closer to family or friends. Once older people have retired, they may no longer need to stay in an area, and moving to see more of the grandchildren, for example, is often the driver for relocation.
Cons of Downsizing
There are financial implications of downsizing which mean we may not improve our wealth as much as we might have hoped. And moving home can be a real wrench if it means leaving friends, family and good memories behind.
Emotional Challenges
Moving out of a family home filled with memories can be emotionally challenging. The attachment to a long-time residence, coupled with the upheaval of moving, often deters older homeowners from taking the plunge. It’s surprising how attached one can get even to plants in a garden when they have been given by family and friends, especially if they are reminders of people no longer with us. Leaving behind a familiar community and routines can also be daunting, particularly for those who have lived in the same place for many years.
Limited Housing Options
Finding the right property to downsize into can be difficult. Many older homeowners seek smaller versions of their current homes, complete with a garden and parking. However, these types of properties are often in short supply. Flats may be available, but they often lack outdoor space, and the complexities of leasehold properties can be off-putting for those used to freehold ownership. This scarcity of suitable homes can make downsizing more challenging than expected.
High Moving Costs
Downsizing can be as expensive as moving to a larger property. Costs such as stamp duty, legal fees, and conveyancing fees can eat into the profits made from selling a larger home.
Availability of services
In today’s healthcare environment, anyone who can access their GP surgery easily, or is being treated by an NHS dentist, or has emergency hospital treatment readily available, needs to consider what changes may happen if they move to another area. It’s highly likely that as we get older we are more likely to develop multiple conditions that need to be treated, or require help when we fall, for example, and be less able to pay for private treatment. How far might we have to travel for these services and how long might we have to wait?
What now for downsizing?
According to estate agents Hamptons, the UK downsizing market has seen a significant shift in 2023, with 41% of all movers reducing their bedroom count – the highest level since 2016. This trend is driven by a mix of economic factors, including the rising cost of living, higher energy bills, and increased mortgage rates.
Downsizers, particularly those nearing the end of their mortgage term, are motivated to free up cash, become mortgage-free, and manage their finances better. The most notable growth has been among those downsizing in value rather than size, reflecting the pressure of higher interest rates.
However, with the market expected to pick up in 2024 and mortgage rates possibly falling, downsizers may face more competition.
Despite these changes, the need for cash, especially to support younger generations in purchasing their first homes, is likely to remain a constant driver in the downsizing market.
Image by Robert Owen-Wahl from Pixabay
