The places where downsizing pays the most

Homeowners downsizing outside London could find themselves up to three times worse off in retirement than those with property in the capital, a report has warned.

It found that for those living in more affluent areas, such as London and the South East, using the equity in their homes would make a “meaningful contribution” to their retirement income.

But for those in the Midlands and the North, the report said there was “far less to be gained” by downsizing.

Based on the profits of downsizing from a four- bedroom to a two- bedroom house, Londoners aged between 65 and 69 would receive £2,523 each month for the rest of their retirement. That is £30,276 a year, according to data collected by estate agent Savills.

However, North East residents who decide to downsize would receive around a third of this amount – feeling the biggest inequality. Their profits would equate to just £826 a month, which is £9,912 a year.

Currently, 1.29m people aged 65 and over live in four-bedroom houses and as a result the Office for National Statistics says 68.8pc of England’s homes are “under occupied”.

In London, the top local authority where the most equity can be unlocked is Westminster (£3.3m or £12,420 per month), followed by Kensington and Chelsea (£2.9m or £10,483 per month) and Camden (£ 1.5m or £5,688 per month).

Life expectancies in these London areas are also some of the highest in the country. In Kensington and Chelsea, the average life expectancy is 87.9 for women and in Westminster it is 84.7 for men, according to charity Trust for London. Savills said it identified a clear correlation between higher house prices and longer life expectancies during its analysis.

Outside of London, it found downsizers in Elmbridge, Surrey, have the next best potential to unlock the most tax-free income.

Lucian Cook, head of residential research at Savills, said his team’s analysis “lays bare the north-south divide when it comes to downsizing”.

He added: “Those who live in typically more affluent areas in London and the South East have the option to use housing equity to make a meaningful contribution to retirement income, despite typically having slightly longer life expectancies.

“For those in the Midlands and the North there is far less to be gained by downsizing and they are therefore likely to leave downsizing until later in life, if indeed they downsize at all.”

Academics from the London School of Economics and University of Sheffield have said removing stamp duty land tax in the spring Budget would incentivise older homeowners to sell up and in turn boost the market.

Stamp duty is charged at 5pc for homes valued between £250,001 and £ 925,000. This doubles to 10pc for values between £925,001 and £1.5m, and rises to 12pc for properties worth more than £1.5m.