Over the last few years upsizing has been a definite trend in the property market.
Upsizing was a trend encouraged by Covid to some extent. People began to look for houses offering more space both inside and outside. But low interest rates over the last 15 years have also been a contributing factor. Many people bought a bigger house simply because they could afford it.
Now, however, are we about to see a complete shift change? Is downsizing likely to be the next trend in the property market?
According to this report, Reallymoving say there was a 41% rise in the number of people downsizing last year.
Savills says that more than half of its offices – 53% – have seen an increase in the number of downsizers on their books since last September.
Downsizing has generally been something associated with older homeowners. But could it now be spreading to the wider property market?
There are a few reasons why downsizing could be a trend in the property market over the next few years.
* Higher mortgage rates. A smaller, cheaper mortgage will save buyers money month after month, and potentially hundreds of thousands of pounds long term.
* Higher running costs. Even quite ordinary homes have become very expensive to run over the last year or so. Downsizing will save money on utilities, Council Tax, maintenance and more.
And here’s another very important factor: A lot of people have built up substantial equity in their home in recent years. But chances are prices aren’t going to rise much over the next few years. So this could be a very good time to cash in on your gains. Take some of the money out of your house and use it for something else.
According to the latest HM Land Registry datathe average value of a detached house in England is currently around £484,500 and the average value of a semi-detached house is currently around £294,000. So the average homeowner who owns their own house and downsizes from one to the other could make a gain just short of £200,000.
Downsizers who have a mortgage could look at the opportunity to be completely mortgage free.
Cashing in on a gain on your own home in this way is completely tax free too. There is no Capital Gains Tax to pay.
Downsizing could also be a way to make money. You could move into a smaller property and add value by extending it.
Here are a few tips for homeowners (and tips for the agents who work with them) to consider with downsizing:
* Be realistic about the space you need. It’s much easier to expand into a large house than contract your lifestyle down into a smaller property. How many bedrooms do you really need? How many reception rooms? How much garden and parking, if any?
What things will you need to give up if you downsize, and are you willing to do so?
* Be realistic about what a downsize involves. For example, moving from a detached house into a flat can be a culture shock. There will be more interaction with neighbours, and more possible problems such as noise.
In the case of flats be aware that the running cost savings might not always be as large as you expect due to service charges and ground rents etc.
* Check the local property market. Is there much choice of property in the area you wish to move to which you can downsize into? For example, bungalows are very popular with downsizers but are in short supply in many places.
Is there likely to be good demand for your existing house? Selling a larger house for a good price relies on there being enough people who are looking to upsize in the market.
* Check values. Larger houses tend to be better value than smaller houses on a per square foot/per square metre basis. So, for example, moving to a house which is half the price as your current house will probably have less than half the space.
* Make sure downsizing works financially. Find out a realistic selling price for your current property, and what is a realistic price for what you are thinking of downsizing into. Take into account what mortgage you might have to pay off, moving costs, legal fees, Stamp Duty and any other moving costs.
It’s advisable to take advice from estate agents when considering downsizing. Local estate agents can advise on what’s going on in the local property market and on local values to help you decide.