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Is downsizing always a perfect fit?

  • 06 March 2020
  • 15 minutes
  • Downsizing is a major trend

  • It can release equity to boost your lifestyle and benefit your family

  • Here are some things you should consider

‘Downsizing’ is very in vogue, with one in three older adults saying they would like to move into a more suitable and manageable home [1]. But selling the family property is usually a major financial and emotional decision that needs to be carefully considered. Here, we take a closer look at the pros and cons of a downsize and highlight some recent trends. We’ve also rounded up some useful sources of guidance to hopefully make this big decision a little easier for you. But first of all, let’s consider why it could be best to stay put!

Reasons to stay

For the two-thirds of older people who are not planning to move any time soon, the thought of leaving the home they love is probably beyond the pale. They may have organised all the maintenance for years, so now the house is decorated just the way they want, and they know all of its good points, weaknesses and quirks. They’ve probably nurtured the garden, built strong memories around the house and may have family, friends, neighbours and contacts nearby.

In addition, they may dread the huge upheaval of moving, which could require months searching for a new property and a great deal of time sifting and sorting through years’ worth of accumulated possessions.

It’s a fact that moving house at any age involves paying stamp duty, lawyer’s bills and removals fees. And while a modern serviced or sheltered apartment may cost less than the family home, it could come with higher monthly service charges than expected.

Reasons to make the leap

Despite all these factors – and the psychological upheaval of downsizing a lifetime’s worth of possessions shouldn’t be underestimated – one third of seniors are keen to make the move.

They may want a much more manageable home that’s more energy efficient, cheaper to run and easier to get around – a property with fewer stairs and wheelchair accessibility. A modern, easy-to-run property that they can lock up and leave without any concerns, can free them up for travel, more socialising and more fun.

According to a House of Commons report [2] the right kind of housing that’s properly adapted for senior residents can allow them to live independently and without care for longer. Communal housing, like retirement apartments or sheltered homes, can also prevent isolation in old age, and the mental health problems this can bring.

People in this situation might also want the security of a sheltered or serviced apartment, somewhere where help can be quickly summoned. These options also come with garden and buildings maintenance, even a dining room where meals are available.

Many seniors who sell up the family home and downsize report a sense of liberation and a fresh start. Some move back to an area they feel a strong association with –maybe they grew up there or holidayed there regularly [3].

Freeing up money that was tied up in their house can allow people to enjoy their lifestyle for longer and have a more adventurous retirement. It can also ensure there’s money available to pay for care later in their lives. It also lets the older generation pass on treasured possessions and financial gifts to other family members, and it could allow younger family members to buy properties of their own.

It’s worth remembering that if you outlive a gift you’ve made by seven years, there’s no inheritance tax liability [4].

Read more: Intergenerational wealth: it’s all the rage

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Escaping to the country

Selling the house, leaving the rat race and escaping to the country are common aspirations. The Office of National Statistics shows that, in the last 10 years, more people over the age of 45 have moved from urban areas to rural ones than the other way around [5]. Yet watching many TV programs that offer an escape to a more rural life, many of those making this journey are looking for the same – if not more – than they are leaving behind. But at the same time they are hoping to achieve this by spending less money than they are liberating from selling up.

A move more akin to downpricing than downsizing. And as they often discover, idyllic houses in the country typically cost more than you might expect.

An important consideration for those pursuing the rural dream is whether the facilities in the country will be as good as those you may be used to in town. Will you be able to walk to local shops, cafes, parks and restaurants? What public transport provision is there, if driving isn’t possible in later years? Also, crucially, what is the health care like? It’s worth noting that 41% of people in rural areas can’t get to a hospital within an hour by public transport or walking, compared with only 6% of urban dwellers [6].

One interesting trend is that a significant number of over-65s are moving to cities. The largest draw in the UK is London, followed by Birmingham and Leeds, but smaller, attractive cities are also seeing an influx. Estate agency Savills cites the city of York as the one where it has recorded the highest proportion of customers (24%) who are downsizing [7].

Conclusion

It has been shown that moving house can be one of the most stressful of life’s events. Undertaking such a move later in life could be both easier (no schools or jobs to accommodate) and harder (physically, and emotionally). While moving to a new area could see you facing similar issues to those facing the newly retired.

Read more: five tips for a happy retirement

Talking to an experienced financial adviser, especially one who truly understands what you are hoping to achieve at this stage of your life, is a great way to clarify your long-term goals, discuss the options and any potential issues, and put together a plan that will help you reach them.

Important information

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Sources

[1] https://www.ageuk.org.uk/globalassets/age-uk/documents/reports-and-publications/later_life_uk_factsheet.pdf (May 2019)

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/862320/Rural_population_and_migration_Jan_20.pdf (January 2020)

[3] https://www.wsj.com/articles/downsizing-your-home-is-hard-how-to-decide-whats-worth-keeping-11579705258

[4] http://www.if.org.uk/wp-content/uploads/2012/04/Understanding-Downsizing-Why-People-Choose-to-Downsize-or-Not.pdf

[5] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/862320/Rural_population_and_migration_Jan_20.pdf

[6] https://www.ageuk.org.uk/globalassets/age-uk/documents/reports-and-publications/later_life_uk_factsheet.pdf (May 2019) [5]

[7] https://www.yorkpress.co.uk/news/18121906.rise-1million-home-buyers-york/ (December 2019)

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