With the housing supply and demand issue ongoing in the UK, the debate over downsizing – and downsizers – has taken on added significance. Many see it as a way of freeing up homes, with people who have retired or whose children have flown the nest moving from a larger home to a smaller one because they have less need for the space.
This, in turn, provides a larger home for a second, third or fourth-stepper to snap up. And, with that, the property wheel keeps turning, with first-time buyers replacing the second-steppers and the second-steppers replacing the third-steppers, etc.
However, recent research carried out by equity release referral service Key Partnerships has revealed that older homeowners have unrealistic expectations about how much money they will raise from downsizing.
While demand for downsizing is increasing, the lack of suitable homes is forcing up prices. Supply and demand is still the big issue, even in the downsizing market.
Key Partnerships’ countrywide survey of estate agents showed that demand for downsizing is growing, with 66% witnessing an increase in enquiries over the past year. The main reasons for downsizing were to raise cash – to boost retirement income or help out family and loved ones – and to help clear mortgages.
The estate agents surveyed, though, are warning that downsizers are overestimating the amount they will make from it, with some 72% of agents believing that older homeowners have unrealistic expectations about the money they can accrue from downsizing.
With supply low and prices high, equity release plans are becoming a much more popular recommendation. This allows homeowners to access property wealth without paying any interest and only repay the loan when they go into care or die.
The research found that, in many cases, equity release plans are being recommended as a better option for older homeowners than downsizing because the savings and extra money that people are looking for is unlikely to be achieved with the market as it currently is.
Suitable homes for downsizers, such as bungalows, retirement homes and specially-modified properties for people who are disabled or less mobile, are seeing large price rises because of a lack of available supply.
If people can't downsize with as much as ease, there could be a situation where people are living in homes that are too big (or unsuitable) for them. Downsizing is a key cog in the property machine – if it is not functioning properly, this could cause problems for the rest of the market.
Once again, it comes back to that issue of supply and demand. Supply is not keeping up with demand, in nearly all areas of the market. This, in turn, is forcing prices up across the country, in particular London and the South East.
The government has talked plenty about upping supply with various schemes and housebuilding programmes, but – as things stand – their plan to build 1 million new homes by 2020 is looking a tad ambitious. On top of this, the number of available homes for retirees or those looking to retire soon is severely lacking.
The government – and housebuilders – will need to cater to this market as well. There is growing demand for downsizing, but at the moment this is not being met with the required amount of suitable homes.