Downsizers can unlock housing market and upsize their retirement plans

Downsizers across England and Wales could unlock an average £305,090 by moving from a four bed to a two bed home, according to the latest analysis from Savills.

There are 1.29m owner occupiers aged 65 and over living in a four bedroom house. Savills analysis reveals the potential income that these households could unlock by moving to a smaller home.

Based on an average life expectancy of about 20 years for those aged 65 the average downsizer can provide themselves a tax free income of £1,218 a month for the rest of their life.

“Understandably, homeowners have traditionally been reluctant to downsize given their attachment to the former family home, but it is increasingly commonplace for people to look at their home as a way of supplementing their pension provision” comments Lucian Cook, head of residential research at Savills.

“Those approaching, or having already reached, retirement age have been some of the biggest beneficiaries of house price growth. By moving to a property that better suits their needs, downsizers  particularly those in high value locations - can give themselves retirement funding a significant boost, particularly vital in the face of rising living costs.”

Generally, there is a strong correlation between a longer life expectancy and higher value housing markets.

Downsizers in London can expect to unlock the most equity by downsizing. On average, Londoners moving from a four bed home, to a two bed home, can unlock £2,523 a month, followed by those in the South East at £1,485 a month.

Those in the North East unlock the least by downsizing, at £826 per month on average.

“This analysis lays bare the north-south divide when it comes to downsizing” says Cook.

“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’re therefore likely to leave downsizing until later in life, if indeed they downsize at all.”

At a local level, the top 10 local authorities where the most equity can be unlocked are all in London – led by Westminster (£3.3 million in total or £12,420 per month), Kensington and Chelsea (£2.9 million in total or £10,483 per month) and Camden (£1.5 million in total or £5,688 per month) – despite the fact that these locations have some of the highest life expectancies in the country.

Outside of London, downsizers in Elmbridge have the potential to unlock the most tax free income.