Over the last couple of years we have seen a significant recovery in the UK property market which has left many homeowners in a far better financial position than just after the 2008 mortgage crisis. As a consequence we are now seeing many homeowners looking to downsize their properties with potential capital returns of between £97,000 outwith the London market and £272,000 from London property. There seem to be a number of reasons why more and more people are now looking to downsize aside from the financial liabilities which large mortgages can saddle homeowners with for many years.
We will now take a look at the main reasons for downsizing in the UK and indeed whether this trend is set to continue in the short term.
Utility bills in the UK are a very hot topic with the opposing Labour Party talking of a utility price freeze while the coalition government has this week announced a £50 per annum reduction agreement with utility companies. There is no doubt that the cost of living in the UK continues to rise at a far quicker rate than household income, especially when taking into account the ongoing worldwide economic difficulties. This is despite the fact that the UK is probably one of the better performing economies in the world so we can only guess how much more difficult it is within mainland Europe and other parts of the world.
Quote from PropertyForum.com : “The US mortgage crisis of 2007/8 literally shook the worldwide property sector and in many ways it has yet to recover fully. You can read the headlines, you can read all of the articles but the truth is that the US mortgage crisis arose because of human emotion, fear and greed. This is what is behind every peak and trough, every boom and bust and every investment cycle. So, have we learned any lessons from the US mortgage crisis?”
Utility bill issues accounted for 43% of those looking to downsize in the short to medium term which illustrates the ongoing challenges faced by homeowners.
Support in later years
When you bear in mind the long-term buoyancy of the UK property market it is perhaps no surprise that those approaching, or at least thinking of, retirement are looking to downsize. This should assist them with retaining their current standard of living in later years which will become more and more challenging in the future. As we touched on above, there are some serious capital repayments on offer for those who have held their property for many years with the London market as ever grabbing the headlines and taking the lion’s share.
In many ways property is becoming more and more of a long-term pension fund for many people in the UK. Aside from the ever-growing cost of running a home in the UK, sometimes in later years it can prove more beneficial to have a smaller property which perhaps requires less maintenance. It was also interesting to see that the average age of those looking to downsize at this moment in time is just 40 years of age which is perhaps a reflection of the challenges facing many in the future. The Lloyds Bank report also stated that 26% of those looking to downsize were between 26 and 35, 26% between 36 and 45 with 24% between 46 and 55 years of age.
There is no doubt that downsizers are certainly growing in number across the UK and when you bear in mind the array of financial challenges facing the UK population this is perhaps not too unexpected. There are significant potential capital repayments at stake with the Lloyds Bank report stating figures between £97,000 and £272,000. When you also take into account the cost of retirement and the ever-growing cost of living perhaps we should not be too surprised that the increase in those looking to sell up and acquire smaller properties.