How can downsizing be made more attractive to homeowners?

Financial incentives and more suitable housing for older people are needed to help fix the UK's housing crisis, according to a new report. 

Barclays surveyed thousands of homeowners to investigate why so many people live in 'under-occupied' properties rather than choosing to move to smaller homes. 

Read on to find out more about the barriers facing older homeowners, and the knock-on effect on housing supply for people trying to move up the property ladder.

Millions of households could be open to 'right-sizing'

A new report by Barclays has found that an estimated 3.8 million households would be open to ‘right-sizing’ (by moving to a smaller property) if doing so was made more straightforward and financially attractive by the government. 

As it stands, less than half of these households say they are open to moving home in the next two years.

Barclays investigated ways to improve the shortage of housing available to people moving up the property ladder. It found that 85% of owner-occupied properties have at least one spare room, but that significant logistical and financial barriers made moving to a smaller home less attractive.

The barriers to moving home

Emotional factors were important when it came to downsizing: 61% of respondents to Barclays' survey said they felt an emotional attachment to their current home. Taking this into account, just 20% said they felt that people should downsize to free up homes for others. 

Stress was also cited as a key issue for staying put: 85% said they felt that moving home was 'always' stressful, while 40% were concerned about the complexity of the moving process. 

Money was a concern, too, as 45% of respondents to Barclays' survey said cost was a key inhibitor to moving home. The latest data from Reallymoving shows the average cost of moving is nearly £14,500. Cuts to stamp duty for people downsizing have previously been mooted, but haven't come to pass. 

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Moving motivations

Prospective movers are also put off by the lack of suitable homes available to them. This has long been an issue in the housing market. 

For example, many older homeowners don't want to move into purpose-built retirement housing, such as a retirement 'village', and dwindling numbers of more accessible homes, such as bungalows, are being built. 

Of those surveyed, 40% said financial assistance would make them more likely to move home, while 39% said the prospect of having a home that requires less maintenance would make moving more attractive. 

When should you consider downsizing?

When to downsize, if at all, is a personal decision. On the one hand, downsizing could involve moving somewhere that suits your current needs better or somewhere that will be more suitable if your circumstances change. On the other hand, you might not think the emotional, financial and logistical stresses of moving are worthwhile.

If you’re hoping to unlock cash from your home to pass on to family members, downsizing earlier will give you a better opportunity to take advantage of your annual tax-free gifting allowance. 

However, moving home isn't the only option. You could consider an equity release plan, which can enable you to access money from your home without moving. Equity release can be complicated, and it’s not the right option for everyone, so we recommend taking advice first. 

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How much money could you unlock by downsizing?

This depends on where you live, the value of your property and its condition. Our investigation earlier this year found that downsizers could potentially unlock hundreds of thousands of pounds by moving to a smaller home.

We found that someone downsizing from a four-bedroom property to a two-bedroom home in London could release as much as £414,000. 

This figure is inflated by London’s high property prices. Our findings showed that a homeowner in London would unlock around 46% of the value of the larger house when downsizing, while someone in the North East of England could unlock 56% of the value of their home. 

You’ll also need to consider the other potential costs of downsizing, including stamp duty, estate agent fees, conveyancing and house surveys. Finally, you'll need to be realistic about timings. It could easily take up to a year to prepare and sell your home and move into another property. 

• Find out more: the five costs of downsizing

Housing measures to encourage 'right-sizing'

Barclays has suggested a series of measures that it says the government could implement to help free up capacity in the housing market. 

It suggests introducing targeted incentives for people downsizing, including grants, vouchers or the ability to offset moving costs against stamp duty.

It also recommends making the homebuying process more straightforward, improving the visibility of new housing developments, and building more retirement and age-suitable housing for older people. 

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