Those approaching, or having already reached, retirement age have been some of the biggest beneficiaries of house price growth. Primarily, those who took advantage of the boom in homeownership in the latter part of the 20th century have reached the point where they have paid off their mortgage debt.

According to our research, older generations have more than £2.5 trillion in equity tied up in property, which could be accessed to help fund retirement or to help children or grandchildren get onto the housing ladder.

By moving to a property that better suits their needs, downsizers, particularly those in high-value locations, can give their retirement funding a significant boost, which could be vital in the face of rising living costs.

We know that there are more than 1.29 million owner-occupiers aged 65 and over living in larger (four-bedroom) homes. Moving to a smaller (two) bedroom home that may now be a better fit could unlock an average £305,090.

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

The north-south divide for downsizers 

However, our analysis also lays bare the north-south divide when it comes to downsizing. 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.

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

How can policy play a role?

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.

But to make the most efficient use of our existing housing stock, there needs to be a change in attitudes to downsizing, not just among individuals but also among policymakers.

While housing policy initiatives tend to focus on getting younger generations onto the housing ladder, we also need to look at financial incentives for downsizers to free up stock, as well as greater provision of retirement housing that better suits the needs of active downsizers and that the older generations aspire to live in.

Further information

Contact Lucian Cook

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