Almost 2.5 million ‘last time buyers’ plan to downsize their homes, according to new research from Prudential.
Figures from the bi-annual Prudential Downsizing Index reveal that four in 10 (41 per cent) homeowners over the age of 55 plan to sell their current property – up from 38 per cent six months ago (May 2014).
Three quarters (75 per cent) of homeowners, over the age of 55 who are planning to sell, say they will downsize. The average amount of capital they hope to free-up as a result of these property sales is £87,600 – up from £85,300 in May of this year.
Of those expecting to release equity from downsizing, 45 per cent will spend newly released cash on big ticket or luxury purchases like holidays. Forty eight per cent say they will save or invest the money, while 40 per cent will use the funds to boost their pension pots.
Having too much space appears to be the main driver for downsizing, according to 61 per cent of homeowners over the age of 55. The convenience of running a smaller home (58 per cent), accessing equity (34 per cent), reducing the day-to-day costs of running a large home (22 per cent) and changes in personal circumstances, including divorce or separation (21 per cent), complete the top five reasons for downsizing.
The Index suggests that many ‘last time buyers’ are looking for a change, with 35 per cent of those who are planning to sell saying they will relocate to another town or city within the UK.
Vince Smith-Hughes, retirement income expert at Prudential, said: “Our homes are often our most valuable assets, but also one of our greatest expenses. The financial benefits of downsizing, from both a cost-saving and releasing capital perspective, can be very enticing. But those who are considering it should exercise caution and be careful not to overestimate the level of funds they expect to receive.
“Freeing up cash as a result of selling your property may be appropriate for some, but it should never be seen as a substitute for saving for retirement. The best way to secure your desired standard of living in retirement is to save as much as possible from as early as possible and to seek professional financial advice on the best retirement income options available for your needs.”
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