Downsizing is on the rise – what should homeowners consider

Older homeowners in larger homes could boost their retirement income by releasing up to half a million pounds in some parts of the UK through downsizing, though there are risks involved.

New research by Rightmove suggests larger property homeowners outside of London could release £498,687 in cash on average by downsizing from a five-bedroom to a three-bedroom house. 

Downsizing can help boost your retirement income, explained MoneyHelper, while smaller houses "usually have cheaper bills and lower maintenance costs, too".

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It would also be great for the housing market more widely, said LoveMoney, "freeing up properties for second-steppers who are struggling to make the leap" and then also making more housing stock available to first-time buyers.

But beyond the admin, costs and stress, said the Daily Mail, it can be "hard to surrender" a family home "filled with family heirlooms and fond memories".

What is downsizing?

Downsizing is the term used for when a homeowner sells their property and moves to a smaller home.

This is often done by older parents who now have an "empty nest", said reallymoving, or "are struggling to deal with the upkeep" or costs of their home.

The older generation is "finally on the move", said the Daily Telegraph, citing TwentyCi data that showed the number of homes being sold by those aged over 66 is up 13% annually. Reasons range from "age catching up with them:, to being closer to family or the cost of living crisis.

The benefits of downsizing

Downsizing makes sense, said Hargreaves Lansdown, "if you no longer need the extra room", plus it could generate "extra cash" for your retirement.

One of the main benefits of downsizing is the amount of money you could release from the sale of a larger property to boost your retirement income, especially if you have paid off your mortgage.

Property website Rightmove suggests there are "cash-equity release opportunities" for those ready to downsize to a smaller home.

While larger property homeowners outside of London without a mortgage could release £498,687 in cash by downsizing from a five-bedroom to a three-bedroom house, based on current average asking prices, this rises to as much as £1,062,087 in the capital.

Downsizers from the North East gain "the most proportionally", added Rightmove, recouping 65% of their five-bedroom property value, the highest percentage of any region. Homeowners in the East Midlands, South West and East of England could unlock 58% of their five-bedroom property value, "still a significant cash return".

Beyond the money, a smaller home can also be made more accessible, said MoneyHelper, or you could move to a bungalow or retirement flat, letting you "keep your independence for longer".

Downsizing drawbacks

Downsizing can be "difficult emotionally", said the HomeOwners Alliance, as you are leaving a property where you may have lived for many years. Plus, you need to be sure that all your items will fit otherwise you may need to put them in storage or "get rid of them".

You also have to consider where you will move to, added LoveMoney, and "how much you will be left with", once you have paid estate agency sale fees, stamp duty, removal, legal and survey costs.

That makes it all the more important that you don't rely on downsizing solely for your retirement income, added Hargreaves Lansdown,  as you may not "get as much cash as you expect".