Making Downsizing a Natural Step on the Housing Ladder
For years, politicians and economists have looked at the housing market and detected the same bottleneck; too many large homes under-occupied by older owners, too few family houses available for those who need them. The prescription is equally familiar: downsizing, or ‘rightsizing’.
While the concept sounds simple the reality is far more complex. Data from Strutt & Parker’s latest Housing Futures survey shows both the potential and the pitfalls.
At least 38% of homeowners say their next move will likely be to a smaller property. Only one-in-five said that “nothing” would persuade them to downsize, leaving a large, persuadable cohort of potential downsizers if the right homes were available.
What Downsizers Want
The demand is not for bare-bones retirement flats. Downsizers consistently request “smaller but not compromised” homes. 40% said they would only move if their kitchen were at least as large as their current one, whilst 13% said they would want a garage even though they don’t have one currently. Storage space, gardens, and a sense of continuity matter more than many assume.
This reflects real-world hesitations. "One of our clients sold in order to downsize in the local area, but with three dogs, an interest in gardening, and visiting family to consider, moving from a country house to a minimalist box was not going to cut it. Like many of our clients, it was more about moving to a home that was more manageable, easier to look after, without compromising on character or the ability to still feel like a family home” comments Oliver Custance Baker, head of Strutt & Parker’s Country House Department.
Their concerns mirror the 35% of survey respondents over 65 who said retaining outdoor space, particularly for a vegetable patch, was a deciding factor, and 80% of downsizers who still require space for hosting – even if it is greatly reduced.
Location is also critical. Being closer to family and friends is a significant driver, while GP surgeries were cited almost as often in home movers’ preferences as housing features themselves.
Finances Fall Both Ways
From our Housing Futures survey we know that one-third of those open to downsizing said they would consider moving if it meant substantially lower monthly costs. Beyond lower bills is the well-earned chance to release some equity. A round-the-world trip, that new, impractical car, or helping family get on the housing ladder can be an enticing prospect. Over a quarter of downsizers stated releasing equity as a primary reason.
Yet there is a flip slide to the coin. Downsizing can both reduce your monthly outgoings, and provide you with a lump sum, but it is not free to do so. Stamp duty is a cost attached to any housing purchase so – unless you are one of the 7% of downsizers moving into rental accommodation – it is a tax you will have to pay.
People are aware of this cost, and it holds back many from moving on from a home they accept is bigger than they need. 27% of potential downsizers (those not planning to downsize, but open to the idea) stated that tax benefits for downsizing would make them consider a smaller home as their next move. This is perhaps unsurprising when the current tax burden is £20,000+ on a £600,000 home.
Stamp duty has become the lightning rod. It is why Chancellor Rachel Reeves’ Treasury is reportedly weighing radical stamp duty reform in the Autumn Budget. Some have argued this would unlock as many as 2.5 million moves over five years.
Yet the politics can be treacherous. If not carried out correctly with attention to detail, it could create a situation where certain parts of the market are less inclined to sell, creating a sticking point. The reintroduction of capital gains tax on primary residences has also been floated by the Government; locking people into their homes for even longer.
Towards Organic Downsizing
The lesson from both the data and anecdotes is clear: downsizing is not a rejection of aspiration, but an attempt to balance lifestyle, family, and finances. The pool of potential movers exists. The barriers are partly supply, with too many ill-designed “retirement boxes” and too few modest houses with outside space, and partly fiscal, with SDLT acting as a blunt disincentive.
Policy changes need to be considered, rather than rushed. Our research shows that 42% of homeowners are open to downsizing if the right property exists. Incentives such as stamp duty relief for over-60s moving to smaller, lower-value homes would directly target the blockage. The pre-existing need for EPCs, which contain the square footage of a property, means this incentive would have little additional burden on sellers or regulators. Coupled with planning reforms to encourage developments of “rightsized” homes near amenities, this would release those acutely aware that downsizing is their next step on the ladder, and free-up a raft of underutilised homes.
Britain’s downsizing dilemma is less about willingness and more about design. Design of property, places, and policy. Redesign those and the housing market could finally unclog. Leave them as they are, and downsizing will remain a rung on the housing ladder that Britain never quite manages to take.