Homeowners of five-bedroom properties who own outright could unlock almost £500,000 by downsizing to a three-bed property, research has shown.
A recent study by Rightmove revealed that homeowners in a five-bed property could save an average of up to £498,687 before moving costs. This is based on the average asking price in the UK – barring London – for a five-bed house being £805,804 compared to £307,117 for a three-bed, which is a 62% difference in asking prices.
London sees the highest potential average cash return when downsizing, with movers likely pocketing around £1,062,087 when moving from a five-bed to a three-bed house. This is followed by the South East with a £650,707 cash return and the South West at £490,559.
Within England, the North East has the lowest average cash return at £339,425, with the East Midlands pegged at £359,638 and Yorkshire and the Humber coming to £383,075.
The average cash returns for downsizing in Wales and Scotland are estimated at £337,494 and £328,510 respectively.
The report found that five-bedroom houses have seen the highest price growth in the past decade, with asking prices jumping by an average of 36% since 2014, which could mean a larger cash return when downsizing.
Rightmove said that downsizing from a five-bed property with an Energy Performance Certificate (EPC) rating of E to a three-bed house with an EPC rating of C could save homeowners an average of £3,806.
The research stated that if 150,000 larger households made the move, around £0.5bn per year could be saved in energy costs.
Tim Bannister, Rightmove’s property expert, said: “Downsizing is a sensitive topic for many homeowners, as emotional ties and the inconvenience of moving often deter them from selling their family homes. However, empty nesters may overlook the significant benefits of downsizing, such as reduced energy bills and increased cash from purchasing a smaller home, that can still cover moving costs with leftover returns.
“By transitioning from a five-bedroom to a three-bedroom house, homeowners could still retain spare bedrooms for guests and free up on average half a million in cash for other uses before moving costs.”
James Linder, regional sales director at Leaders Romans Group, added: “We’ve observed a trend in downsizing among homeowners, particularly in towns with family homes and larger urban areas. Many people are downsizing to release equity, often using the substantial cash returns to help their children get onto the property ladder. Additionally, the potential savings on energy bills, council tax, and maintenance costs are considerable. Moving can save homeowners a significant amount annually in energy costs alone. Lower council tax and reduced upkeep expenses further enhance the appeal of downsizing.
“We are also witnessing a demographic shift, with more individuals in their 60s opting to downsize, compared to the traditional age range of 70-80. This younger group is proactive in securing their financial future and reducing their monthly costs.”
