The Daily Telegraph - Saturday - Money
The ultimate guide to downsizing
Moving to a smaller home should be seen as an opportunity. Phil Spencer explains how to make the most of it
Buying your forever home is a big step for any family. It is likely to be where you plan to raise your children and maybe even host grandchildren one day.
Our family homes become the focal point of our lives and the location for many, if not all, major milestones.
But there comes a point where they no longer make sense for us. Maybe retirement means you have more time to go travelling and it doesn’t work practically to hold on to a larger property. Or perhaps you want to move closer to friends or your children and don’t require as much space. The reasons for wanting to downsize are varied and personal.
For many it will be at least a partly financial consideration, allowing them to free up the money stored in their home’s equity. This could allow them to start inheritance tax planning or boost their retirement pots.
But even if it is a positive step into the next phase of your life, in my experience it is never an easy decision.
Therefore my first piece of advice is simply to think ahead. In one of my earlier columns I recommended trying to think five years into the future. In that case I was talking about buying your first or second home, but I think the five-year rule still applies when thinking about later in life.
Thinking five years ahead allows you to imagine where your life will be at that time and what you may need from your property.
For example, do you have young grandchildren now who are likely to want to come and visit? Or is it a priority for your new property to have a garden, so you can carry on your green-fingered hobby?
Change, but for the better
Whatever vision you have for your retirement, getting there may involve accepting changes and a slight reckoning with reality. Will you be as mobile in five years or able to travel as far? All these are worth thinking about in order to avoid getting caught out, even if it is an uncomfortable process.
I’m sure many of us would like to be more rational about our homes and finances – I know I certainly would – but in reality we are often led at least in part by our emotions. Leaving our homes, the spaces we know and love, is difficult.
You may have furniture, art or keepsakes that have sentimental value that there won’t be space for in your new home. Or perhaps you are moving to a new area and face the prospect of settling into a different community.
But planning ahead can help you prepare for the change and manage the process. It also means you don’t leave it too late. And I see that happen more often than not. People hang on in, because moving home is stressful, challenging and expensive.
However, I think it can be a really positive experience that helps you make the most of the next stage of your life. Thinking about and making preparations for the change also allows you to have a clear picture of what you are looking for. When I think about downsizing later in life I envision myself in a big country house that has been split into apartments. The type of building means I could get well-proportioned rooms and lovely high ceilings, in a setting with a big garden that I don’t have to look after and a ready-made community. It sounds good, doesn’t it? When you are not forced by circumstance you have more opportunity to work out what you want.
Downsizing and moving to a property in the same city or town can also offer homeowners a way to release a part of a property’s value. Jackson- Stops, an estate agent, calculated that swapping a detached for a semidetached house in the same area typically netted movers £205,157.
It is also worth thinking about the more practical aspects of where you want to be. For example, how many GP surgeries or hospitals are there nearby? Is the centre of town easy to get to via public transport?
Savills has produced a leaderboard of England’s best downsizing locations, ranking various factors such as the prevalence and distance to dentists and areas of outstanding natural beauty, as well as, of course, house prices. The research puts Merton and Cheltenham top, with Exeter, Sutton and Bromley all within the top 10.
It’s worth looking around to see what is on offer. Perhaps you don’t want to buy again at all. Renting in retirement is becoming increasingly popular. Opting to rent instead of all the faff of buying could allow you to keep hold of more of the money you release from selling your home to pass on to loved ones during your lifetime. Or it could go towards the trip of a lifetime you have always planned. More practically, renting can provide flexibility if you need to move again further down the line.
Furthermore, renting instead of buying means you avoid paying stamp duty – often cited as one of the reasons retirees feel they can’t downsize.
Personally I think this is the space where the Government could make a difference. We have to find a way of incentivising people to move out of the four or five-bedroom homes they no longer need. It’s not easy, but something along the lines of a stamp duty exemption for downsizers could help get the market moving in this area. It would also free up homes for families looking to move up the housing ladder.
The data backs this up. Two fifths of homeowners aged over 65 live in a home that is larger than they need, meaning they are locking 2.6m homes out of the market that could otherwise be purchased by young families and first-time buyers, according to property website Zoopla.
In total, this group of homeowners are sitting on 10m spare bedrooms. Nearly a fifth said that in a normal year they don’t use any of their spare bedrooms. That is a huge amount of unutilised space up for grabs if the right incentives are put in place.
A stamp duty cut for people genuinely downsizing would be a shot in the arm for the housing market just as it looks to be stagnating. If, after weighing up the options, you do decide to go ahead with a move there are some things I recommend.
Firstly, don’t be afraid to ask for help. If you have been in your family home for much of your adult life the property market may look very different now to when you were last searching.
Retaining a buying agent to represent your interests will help ensure you are getting the right advice and the right deal. There is a risk that if you have been out of the market for a long period of time and you are sitting on a nice cash sum because you are downsizing, that you are exposed to people who would like to get as much of that cash as they can.
In some ways you are like a first-time buyer – sadly without the tax exemption – but you are unencumbered by a property chain so likely to be a very popular buyer. Don’t forget that: sellers should be biting your arm off.
Secondly, I would familiarise yourself with what is on offer on the market within your desired area and budget. You may be used to having a large kitchen, a separate dining room and areas to host in. It is likely to all look different once you move, this isn’t necessarily a bad thing. A smaller space requires less maintenance.
They are easier to heat and if you opt for an apartment, may even have an on-site team to help sort any issues.
But for all the benefits, the change will require adaptation and time spent figuring out what your priorities are. Go back to the five-year rule: you may be in the fine fettle at the moment, but there will come a time ( for all of us) when we could do without stairs. Plan for that now, not when it’s too late.
And finally, don’t be afraid. Change is hard, but I really think downsizing should be a positive experience. It’s time to prioritise your lifestyle, rather than holding on to a home that is designed for family life and getting to work. Perhaps you love the theatre. Wouldn’t it be lovely to be able to stroll from an easily managed, warm property to catch the latest play or musical? Downsize your home; but upsize your lifestyle. Best of luck!
‘Thinking five years ahead allows you to imagine where your life will be at that time and what you may need from your property’