Downsizing is only worth it if you make at least £108,000 in profit, say homeowners

Homeowners who could downsize say they would need to make a profit of more than £100,000 for it to be worthwhile, findings show. 

According to Barclays, potential downsizers said they would want to walk away with £108,000 from a property sale after buying a smaller home. 

Most homeowners surveyed said they were were not open to the idea of downsizing and 53 per cent said they had no intention of doing so.

Homeowners are put off downsizing by not only the upheaval of leaving their home, but also by costs such as stamp duty, legal fees and removals. 

Barclays said: 'Not only are costs themselves a barrier, but the homeowners surveyed also had high expectations about the money they would need to unlock to consider downsizing financially worthwhile.'

Those who downsize after many years living in the same property can stand to make large profits, especially in more expensive areas of the country. 

Data from consumer group Which? in 2024 found that London movers could potentially unlock as much as £414,000 by moving from a four-bedroom to a two-bedroom property.

But is said that the north east of England was the most lucrative location to downsize in terms of percentage profit. 

Homeowners could recoup up to 56 per cent of their home’s value by moving from a four-bed worth £294,736 to a two-bedroom house worth £118,795, the consumer group found. 

Which? said that in the south east, West Midlands, East Midlands, the north west, Yorkshire and the Humber, Wales, the north east and Scotland, homeowners could make more than 50 per cent profit by downsizing from an average four-bed to an average two-bed.

Only around 24 per cent of homeowners surveyed by Barclays said they would be open to the idea of downsizing. 

Three per cent said they were planning to downsize within the next year, while six per cent said they would consider downsizing within the next six to 10 years. Nine per cent said they would like to downsize, but had no idea when. 

A tenth of the homeowners surveyed said they had already downsized.

Stamp duty barrier 

The research found that upfront costs such as stamp duty, played a key role in discouraging people from downsizing to a smaller home. 

Twenty-seven per cent of homeowners surveyed said stamp duty was the most off-putting upfront cost required when downsizing. 

Barclays said stamp duty was a 'particularly acute barrier' among potential downsizers and that the government could review stamp duty in the future 'to help unlock downsizing'. 

A couple selling a £500,000 home and buying a property for £300,000 would face a stamp duty bill of £5,000, on top of estate agent fees and other costs. 

Seventy per cent of potential downsizers surveyed said being exempt or getting a discount on stamp duty would help encourage them to downsize more quickly. 

Axing stamp duty is a policy pledge reiterated by Conservative leader Kemi Badenoch at the party's recent conference.  

The cost of adapting or renovating a new home was the second most-cited financial thorn among potential downsizers, at 27 per cent, while moving and removal costs were also high of the agenda. 

Many people surveyed said help with moving and legal costs would encourage them to downsize. 

How are people using downsizing cash?  

Among those who said they had already downsized, the most common use of money left over from their downsizing property sale was, at 47 per cent, keeping it as a financial safety net or savings buffer. 

Sixty-seven per cent of potential downsizers surveyed said a larger supply of suitable homes would encourage them to downsize. 

Sixty-six per cent of potential downsizers said they would be more minded to downsize if more affordable retirement properties were available. 

Barclays said: '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, said: 'Downsizing can give homeowners the opportunity to find a property that better suits their needs, reduce household costs and strengthen their financial resilience. 

'However, the decision is rarely as simple as moving to a smaller home. Significant upfront costs and a shortage of suitable options can make a move difficult to justify, even for those who are open to it.

'For many homeowners, the priority is not simply releasing the maximum amount of money. It is finding the right home, in the right place for their stage of life. Therefore, support from the Government to ease upfront costs and improve access to more suitable and affordable homes, could help turn interest into action.'