We’re not prepared to give up the race for space in retirement

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, comments on the results of an Opinium survey (of 2,000 people) on their behalf, which shows that we’re not prepared to give up the race for space in retirement.

Key findings from survey:

Only 20% of people say they plan on downsizing in retirement. Almost 40% (38%) said they don’t plan to move anywhere smaller in retirement, and 42% were unsure.
When asked why they didn’t want to downsize 28% said they were attached to their home. One in ten (11%) didn’t believe they would make enough money from it while almost a quarter (24%) said it was too expensive.
People seem to get less interested in downsizing as they approach retirement. While 27% of those aged 35-44 said they would downsize, only 17% of 45-54 and 14% of 55–64-year-olds said the same.
Londoners top the list with 39% saying they plan to downsize in retirement. This compares to 16% of residents in the South-East.

Helen Morrissey said:

“When you’ve won the race for space, it’s very difficult to give up. Massive house price growth makes the prospect of downsizing in retirement tempting but on closer inspection it is clear not many people are convinced. Only one in five said they planned to downsize in retirement while almost double this amount have ruled it out.

“For many people their home is their most valuable asset and over time can be worth several times what the owner initially paid for it. Selling up and going somewhere smaller could feel like the ideal way to free up funds for retirement, especially if the children have long moved out and the home now feels too big.

“However, when it’s time to make the move, people become less keen. They’ve made memories in their home and are reluctant to leave an area where they may still have family and friends. In addition, the financial reality may not be as positive as the fantasy, with the costs of moving taking a chunk out of their proceeds and leaving them with far less than they hoped for.

“Londoners were by far the most likely to say they planned to downsize in retirement. Given the huge house price increases we have seen here they are more likely to be able to raise the necessary funds to buy somewhere, particularly if they relocate outside the capital.

“The pandemic has reminded people how valuable it is to have room to roam at home, and the prospect of giving that up at a time when they may be spending more time at home isn’t appealing.

“However, while downsizing may not appeal early in retirement, as we get older our needs tend to change. We may want to be closer to family, or within easy reach of things like the GP surgery or local shops. And all that space may appeal less when you only ever go into the spare room to dust it. You need to ask yourself whether you will want or need to move at an older age or whether you want to settle in a new home while you’re more active.

“If you choose not to downsize but still need more money to fund retirement, you need to consider how you will raise the money you would have got from downsizing. You may be able to cut your costs or work later in life, but you may also be tempted to release equity from your home instead. This comes at a real cost, not just because of the fees involved, but also because in most cases interest on the loan will roll up, and the amount you owe can easily double before you repay it. Equity release can also stop you from downsizing later if you change your mind, if the debt has eaten so far into the equity in your home that you can’t afford a smaller place.

“The right answer is different for everyone, but it’s important to consider it all carefully before you rule out downsizing.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay