2nd September 2015
Retirees are being put off downsizing by a lack of suitable homes on the market and a fear of losing touch with family and friends, according to new research.
Around one in five clients has inquired about downsizing their house to release equity with their financial advisers, research from Bower Retirement Services shows.
Its Adviser Tracker Research shows that for the average adviser, one in five clients consider downsizing in order to use their property wealth to help fund retirement.
However lack of available homes to buy and the cost of moving are proving to be major barriers to plans to move to cheaper properties, Bower’s quarterly research shows.
The fear of losing touch with family and friends is the main reason for not going ahead with downsizing, the study found. Around 70% of advisers say clients dropped plans to downsize because of family ties.
Nearly half of advisers (47%) questioned said clients could not find suitable homes to move to while 37% blamed the cost of moving and feared they would not make enough money.
The struggle to move is reflected in Land Registry data showing property sales in England and Wales fell 15% in February to May compared to the same three months a year ago. The monthly average of sales was 61,283 compared with 70,029.
In May sales were 15% down on a year ago. One of the biggest drops was in the number of sales of houses valued between £200,000 and £250,000 which fell by 26%.
Andrea Rozario, chief corporate officer at Bower Retirement Services, says: “Downsizing is logical and sensible and should work for many over-55s homeowners if they can find the right house at the right price.
“It is clear however that it is not that simple as there are financial issues to deal with when moving house with stamp duty alone costing 5% on house prices above £250,000 which can make the decision to move uneconomic. Buying a £300,000 home would cost around £5,000 in stamp duty.
“When you add that to the emotional wrench of moving home with the risk of losing touch with family and friends it can make downsizing seem a bad idea.”
The Bower research shows attitudes are shifting on leaving an inheritance – 63% of advisers said their older clients are less worried about leaving money now with the main reason being that children are financially well-off.