7 February 2024 – A new survey reveals that only 14% of adults aged over 55 and are not yet retired consider downsizing.
In contrast, 50% plan to remain in their current family residence after retirement. This figure rises to an overwhelming 68% of those aged 71-75 who also echo the sentiment.
Moving and stamp duty costs discourage would-be downsizers
Pegasus, a leading later-living provider, commissioned the survey that involved more than 2,000 individuals. Aside from determining the general attitude towards downsizing, the report also determined the main reasons behind the unwillingness to downsize.
The primary obstacle lies in the hassle of moving. 37% of the participants found moving house to be a logistical nightmare. Aside from finding the best movers, segregating belongings and packing them up is understandably daunting for individuals in their twilight years.
Meanwhile, 35% of those surveyed cited the cost of Stamp Duty as the next factor making them hesitate to downsize. Stamp Duty costs for retirement properties are the same as any other residential property.
With the current Stamp Duty rates, properties with a value below £250,000 are exempt from the tax. For properties between £250,001 and £925,000 the rate is 5%. Due to the sharp price rises in the past three years, many downsizer properties that might have been exempt from stamp duty have now passed the threshold.
As a result, stamp duty costs have gone up considerably, making moving for people of retirement age more expensive.
Massive shortage of senior housing options catering to later-living needs
The next leading barrier is an inadequate supply of suitable housing for 26% or more than a quarter of potential downsizers. Unfortunately, this is reflected in a lack of consideration towards senior living.
Findings from a recent study by Knight Frank and Irwin Mitchell determined that more than a third of local authorities do not have policies for housing an ageing population.
Additionally, demand for retirement community homes is high all across Britain.
According to the House Buyer Bureau, an authority in property purchasing, despite the high demand from prospective downsizers, competition for retirement community homes is also at an all-time high due to limited supply.
For example, out of the 672,375 total properties listed in May 2023, a measly 3.7% were retirement homes.
Reduced downsizing movement bottlenecks property market movement
Unfortunately, this reluctance to downsize may stress the current housing market more than previously thought.
As the number of older homeowners staying in underutilised larger homes increases, first-time and prospective upsizing buyers are left to fight among the limited supply by themselves. This disrupts the already fragile market and further slows down transactions.
The demand is only projected to rise as the number of people aged 65 and over balloons to 22% of England’s total population within ten years.
High-quality medium and small residences can respond to an unfulfilled niche within the less-understood needs of senior housing. Therefore, there is an urgent call to developers to cater to the rising demand for retirement homes and other smaller and more accessible properties.
Once the supply is abundant, many retirees may be open to downsize through various methods. In fact, one in five of those over 55 were amenable to renting in their retirement years.
It may also be beneficial to offer relief of Stamp Duty costs for last-time buyers. As it stands, 75% of all housing equity is held by those older than 55.
It is worth looking into the SDLT exemption to stimulate the market and promote property turnover to the next generation of homeowners.
Overall, there may still be time. With enough options to accommodate late-living, attitudes towards downsizing can still be fixed. Presently, those within the 55-65 age bracket are most receptive and optimistic towards downsizing at 88% compared to only 8% for those aged 66-75.
Our Opinion
Downsizing has always been a big part of the property market. Once the children have flown the nest and a big house was no longer needed, older people would downsize. The bigger home would then be free for a young family to grow into.
The smaller house they leave behind provided a home for a young couple or first-time buyer. That’s how the property market is working. However, it appears that this cycle is broken.
If downsizers aren’t able to move to a smaller house, the whole property market is affected. While house prices have always risen, the sharp rise in the past three years meant they have risen faster than incomes.
As a result, stamp duty costs have risen too. The market is likely to balance itself out again. But the bigger issue is the lack of suitable homes.
This is an issue that has plagued the property market for years. It’s not just a lack of homes that are suitable for older people, but also affordable homes for first-time buyers.
And this won’t sort itself out. Action is needed from the government to increase the supply of suitable homes. Only then can the problem be solved once and for all.
