Downsizing windfall rises to over £100,000 in 2014

23 January 2015

•    An average of £121,686 can be potentially raised by downsizing to a semi-detached home – with London the most lucrative place to do so, with an average amount of £263,770
•    Downsizing to a bungalow is the most common option, with those moving from a detached house releasing an average £103,715
•    Over half (52%) of those looking to move are considering downsizing, and it continues to be the main reason to sell a home

The latest Downsizers Report from Lloyds Bank shows how trading down from a detached house to a bungalow or a semi-detached house could raise a significant amount of cash. Those moving to a bungalow can free up £103,715 on average, with those moving to a semi-detached house standing to raise even more money, up to £121,686.

Downsizing continues to be the key driver of property moves, with over half (52%) of homeowners planning to sell their property in the next three years saying they’d like to move to a smaller house.

Downsizing in 2014 is nearly 10% more profitable than in 2004
For those trading down, the potential amount that can be raised by downsizing from a detached property to a bungalow has risen by 8% (or £8,081) over the past decade; a downsizer today would receive an average of £103,715; compared with £95,634 in 2004. (See table 1)

The potential amount of cash homeowners could raise by downsizing their property from a detached home to a semi detached stood at an average of £121,686 in 2014; an increase of 6% (£6,943) since 2004. (See table 2)

Three in four expect to make money when they downsize. Of those, two in five (43%) will reinvest this money in a new property, a quarter (26%) will invest in other financial products and over one in ten will invest in their pension (13%) or give to their family members (13%). Just over a quarter are (26%) are planning to move to a more affordable area, 5% less than in 2013.

Needing a smaller property continues to drive downsizing
Almost two thirds (63%) said one of the main reasons for downsizing is to find a smaller property that better suits their current circumstances.

After this, the key drivers for downsizing are largely financial, with two in five (40%) looking to downsize to help reduce bills and outgoings. 28% of downsizers are also looking to release equity from their property, and a quarter (25%) are looking to help support their retirement plans.

A quarter (25%) of downsizers are also trading down earlier than expected and there are a variety reasons for this including health, change in relationship status and proximity to amenities. The average downsizer is 56 years old, with the greatest proportion having lived in their current property between 11 and 20 years, and having moved in to that property at the age of 39.

Andy Hulme, Mortgages Director at Lloyds Bank, comments:
“Downsizing is clearly still a major part of the housing market with over half of potential homemovers considering a smaller property. The volume of downsizers is therefore helping to keep the market moving, freeing up larger properties for those making their way up the ladder.

“Once people do look to trade down, the benefits are clear. Downsizing can generate significant amounts of money, on average over £100,000 in 2014. It also helps to lower the cost of household bills and frees up funds so that people can enjoy their retirement or invest their money for the future.”

Downsizing to a bungalow in London could raise £289,927
Downsizers in the capital stand to make the most in monetary terms, with potential sums to be made reaching an average of almost £289,927 from trading down from a detached home to a bungalow.

Buyers downsizing from a detached home to a bungalow in East Anglia saw the largest average increase of 38% (or £24,500 – the largest rise over ten years in monetary terms), followed by the south west (32% or £22,664) and Northern Ireland, (29% or £11,477).

Those moving from a detached home to a semi in the south west saw the largest overall increase in the average amount that could be made over the past decade, at 18% (or £19,707), followed by the North (15% or £37,367). London is again at the bottom of the table for the changes over ten years, with a 12% reduction, equivalent to £32,014 less, despite the windfall still being the highest in 2014 at £237,614.