Retired homeowners who wish to bolster their pensions by downsizing their property may be in for a disappointment depending on where they live. Variations in the housing market mean that selling their properties to move into something smaller in the same area and raising some cash isn’t always an option.
A lot of pensioners are looking to downsize their property in order to release equity from their homes. In addition to this, many see smaller properties as cheaper to run, with lower council tax bills and utility bills. 
However, research of the 25 local authority areas in England that have the highest proportion of property owners aged over-55, reveals that downsizing doesn’t always pay off. There is up to a £100,000 difference between areas that generated the most revenue with downsizing and areas that generated nothing.
The equity release trade body SHIP, researched these local authorities and looked at the typical price of a property owned by the over-55s, they then compared that value to the cost of an average home.
In a few areas the older people tended to own more valuable properties with greater equity to be had by trading down, with some areas showing an average of £50,000 could be raised by downsizing their homes. But in other areas the over 55s owned less valuable homes, meaning that downsizing for revenue was much more difficult.
In some cases downsizing would actually leave the homeowners out of pocket by the time they had paid all the costs of selling their properties, buying a new home and the removal fees.
The Director General of SHIP, Andrea Rozario, said: “In a perfect world you would be able to buy a new home, stay in the area that you like and still have a nice little nest egg left over after the costs of moving. But that is not always possible. For some homeowners, releasing equity to raise funds is their only option.”
In areas that have a lot of over-55 homeowners there are a lot of people that want to downsize, meaning a lot of people are chasing the same ideal housing to retire in and that demand is forcing up prices.
Properties such as bungalows have always sold at a premium, Director of the Country Homesearch Company in Wadebridge, Reg Parry explains: “They are popular because they are hardly ever built now and often enjoy slightly bigger plots than new houses. Also, homes that have been adapted to suit the needs of older people can cost between 15 and 20 per cent more than equivalent properties.”
Investment company, Investec Wealth & Investment, ran their own studies looking at property downsizing across all age groups. It found that most homeowners overestimated how much money could be raised by 1/5th.
The company’s senior financial planning director, Nick Gartland warns: “With the housing market remaining in the doldrums, homeowners shouldn’t rely too heavily on downsizing.”
Equity release allows retirees to borrow money against the value of their home without having to sell the property. Typically the cost of equity release is between £1,000 and £2,000, which includes all legal and financial advice.
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