Homeowners Want Over £100,000 Profit to Downsize, Study Finds

Homeowners considering downsizing their properties would need to realize a profit of at least £108,000 for the move to be financially worthwhile, according to new findings. A significant majority of homeowners surveyed are not open to downsizing, with 53% expressing no intention of doing so.

The decision to downsize is hindered not only by the disruption of moving but also by substantial costs, including stamp duty, legal fees, and removal expenses. Barclays, which conducted the research, noted that homeowners have high financial expectations for downsizing to be considered a viable option.

While some homeowners, particularly those in expensive areas, can unlock substantial profits by moving from larger to smaller homes, these figures vary regionally. Data from 2024 indicated that London movers could potentially gain as much as £414,000 by transitioning from a four-bedroom to a two-bedroom property. In the north east of England, downsizing from an average four-bedroom house worth £294,736 to a two-bedroom property valued at £118,795 could yield up to a 56% profit. Similar profit margins exceeding 50% are possible in various other regions across the UK.

Despite these potential gains, only about 24% of surveyed homeowners expressed openness to downsizing. A small fraction, 3%, are planning to downsize within the next year, while 6% would consider it in the next six to ten years. Another 9% wish to downsize but are undecided on a timeline, and 10% of respondents reported already having downsized.

Stamp Duty as a Major Obstacle

Stamp duty emerged as a key deterrent, cited by 27% of homeowners as the most off-putting upfront cost. Barclays identified stamp duty as a "particularly acute barrier" for potential downsizers and suggested that the government could review this tax to facilitate downsizing. For instance, a couple selling a £500,000 home and purchasing a £300,000 property would incur a £5,000 stamp duty bill, in addition to other moving expenses.

Seventy percent of potential downsizers indicated that an exemption or discount on stamp duty would encourage them to move more quickly. The Conservative leader Kemi Badenoch has previously reiterated a policy pledge to abolish stamp duty. Following stamp duty, the cost of adapting or renovating a new home was the second most cited financial concern, also at 27%. Moving and removal costs were also significant considerations, with many homeowners expressing that assistance with these expenses would motivate them to downsize.

Reasons for Downsizing and Housing Availability

Among those who have already downsized, the most common use of the remaining funds, at 47%, was to place it into savings as a financial safety net. For those considering downsizing, 67% stated that a greater supply of suitable homes would encourage them to move. Furthermore, 66% would be more inclined to downsize if more affordable retirement properties were available.

Barclays emphasized the importance of "the availability of suitable and affordable homes, including retirement and accessible housing, is important for giving those open to downsizing attractive options to move into." Jatin Patel, head of mortgages, savings, and insurance at Barclays, commented that while downsizing can offer benefits such as reduced household costs and improved financial resilience, significant upfront expenses and a lack of appropriate housing options can make the decision difficult. He added that government support to ease initial costs and enhance access to suitable, affordable housing could help convert interest into action.