Best downsizing locations revealed: Over 65s can unlock £300,000 on average

The average downsizer could unlock more than £300,000 by moving from a four bed to a two bedroom home, new analysis by property firm Savills shows. 

It said there are 1.29million owner occupiers aged 65 and over across England and Wales who live in four bedroom houses.

Were they to sell and buy a two bedroom property, they could expect to be left with £305,090, following the move.

Based on an average life expectancy of roughly 20 years, for those aged 65, Savills estimates the average downsizer could then provide themselves with a tax free income of £1,218 a month for the rest of their life.

Where’s best to downsize: The average Londoner is able to unlock £2,500 per month by downsizing versus £826 in the North East

Lucian Cook, head of residential research at Savills said: ‘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.

‘Those approaching, or having already reached, retirement age have been some of the biggest beneficiaries of house price growth. 

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

Of course, the major caveat with Savills average downsizer income assessment is location, albeit there is a strong correlation between a longer life expectancy and higher value housing markets.

A 65-year old downsizer in London can expect to unlock the most equity by downsizing, according to Savills. 

On average, a 65-year old Londoner 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.

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

Cash cow: Downsizing from a 4 bed to a 2 bed home in England and Wales could unlock more than £300,000 on average equating to an income of more than £1,200 per month on average

‘This analysis lays bare the north-south divide when it comes to downsizing,’ says Lucian Cook.

‘Those who live in typically more affluent areas in London and the South East have the option to use housing equity to make a meaningful contribution to retirement income, despite typically having slightly longer life expectancies. 

‘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.’

At a more local level, the 10 local authorities where the most equity can be unlocked are all in London, according to Savills. 

This is despite the fact that these locations have some of the highest life expectancies in the country.

This is led by Westminster, where an average £3.3million in total could be unlocked by the average four bedroom homeowner downsizing to a two bedroom property leaving them with a £12,420 income per month. 

Kensington and Chelsea downsizers could unlock on average £2.9million by selling up and moving to the average two bed. That would leave them with a £10,483 income each month until they die. 

The average four bed downsizer in Camden could unlock £1.5million in total and live off £5,688 per month for the rest of their lives. 

Outside of London, downsizers in Elmbridge in the South East have the potential to unlock the most tax free income.

Moving from a four-bed to a two-bed there can unlock a total of 673,476 on average resulting in £2,524 of monthly income.

So what’s stopping people?

With such a big financial incentive, one would think older people living in four bedroom homes would be mad not to cash in.

What’s holding them back financially? Most likely it’s stamp duty followed by all the other costs associated with moving.

Savills says that while its calculations excluded any savings interest or gains from investing the sales proceeds it also doesn’t take into account taxes such as stamp duty in England and Northern Ireland or legal fees.

Currently, stamp duty kicks in for house movers on property purchases above £250,000, although this is set to fall  to £125,000 from April 2025. 

While someone moving to the average two bed home costing £257,260 will only face a stamp duty bill of £363, in many areas across England it will amount to much more.

This will also be true for movers in Scotland and Wales, which have their own separate transaction taxes when buying property or land.

In England, for example, the average two-bed in Westminster costs £1,586,725, according to Savills. Someone downsizing here would therefore on average face a stamp duty bill of £101,656.

Someone downsizing to the average two-bed in Elmbridge in the South East of England where prices are £468,543 will still be stung with a stamp duty bill of almost £11,000.

Savills analysis also doesn’t take into account estate agent fees associated with selling a property.

The average high street estate agent fee is around 1.5 per cent of the final selling price. Although they can typically range between 1 and 3 per cent, not including the additional 20 per cent VAT they may be required to pay on top.

Someone selling the average 4-bed home, worth £562,350 according to Savills, paying the average estate agent of 1.5 per cent plus VAT (totalling 1.8 per cent) can expect to pay more than £10,000 for the privilege of doing so.   

However, there is more to it than just cash. 

Many over-65s will have lived in their home for much of their adult lives, and to move elsewhere would require a major upheaval, both in terms of physical and emotional baggage.

According to recent analysis by Zoopla, the average homeowner over 65 has lived in their property for 26 years. 

It found a quarter of older people feel moving home would be ‘too stressful’ while emotional ties are also a barrier preventing more than one in five from moving.

There are also many who will intend to hold on to their home in order to pass it down to family members.

Zoopla found that a quarter of people plan to remain in their home so their family can inherit it – meaning their own children or grandchildren are less likely to have trouble finding a family-sized home in the future.