Homeowners who downsize can now make over £100,000 profit, due to the high demand for family properties, which is pushing up their prices.
Downsizers are making £8,000 more than they were ten years ago, as the value of detached houses has grown faster than semi-detached homes and bungalows. Family properties are rising in value as less house building and a growing population means that they are in short supply.
The price of flats, semi-detached houses, terraced properties and bungalows has increased more slowly.
Research from Lloyds Bank revealed that downsizing in 2014 was around 10% more profitable than in 2004.1
Lloyds found that people moving from a detached home to a semi-detached would make a typical £121,686, whereas people moving to a bungalow would make £103,715.1 Buying a bungalow is less profitable as single-storey homes are in short supply and sell for higher prices.
Andy Hulme, of Lloyds Bank, says: “Once people do look to trade down, the benefits are clear. Downsizing can generate significant amounts of money, on average over £100,000 in 2014.
“It also helps to lower the cost of household bills and frees up funds so that people can enjoy their retirement or invest their money for the future.”1
The average detached house has risen in value by £35,000 since 2004, compared to £29,000 for a semi-detached and £28,000 for a bungalow. Detached properties now cost £313,036 on average, says Lloyds, with a semi-detached at £191,250 and £209,321 for a bungalow.1
The average person downsizing is 56-years-old and has lived in their current home for between 11-20 years. In Lloyds’ survey, three-quarters expect to make money from downsizing.1
About half will reinvest their profits in a new home, a quarter will invest in new financial products, and one in ten put the money into their pension or give it to family.1
Around two-thirds stated finding a smaller property to suit their current circumstances was one of the main reasons for moving, and two in five wished to reduce their bills and outgoings.
These figures arrive as a separate study finds that the rate of property price growth is rising in the north but falling in the south.
House price growth is spiralling in Sheffield, Manchester, Liverpool, and Newcastle. Scotland is also seeing fast increases in Edinburgh, Glasgow, and Aberdeen, after the uncertainty of the referendum.
However, the rate of property price growth is dropping in southern cities such as London, Oxford, Cambridge, Bristol, and Bournemouth, after they reached an affordability ceiling, Hometrack has discovered.
Although prices are still increasing faster in the south, the rate at which they do is slowing substantially. In December 2014, house prices in London were rising by 14% growth on the year, compared to the faster 18% rate in June.1
Hometrack’s Richard Donnell, says: “Prices have gone up so fast in the south, particularly in London, that people are asking if they can afford to buy and if they even want to take out that much debt. The rate of growth is starting to slow. But in the north, growth is starting to catch up, although from a much lower base. There is a bit of a north-south divide.”1