Guest Spot: The dilemma of planning your retirement home - Killens

25 July 2018

With an ever-growing elderly population and a chronic shortage of housing, it is becoming a greater worry on how to address housing needs in retirement.

The housing market is showing signs of cooling nationally with falling demand and stuttering confidence due to the inevitable uncertainties arising from the Brexit vote, the increase in interest rates last autumn and reports of high street retailers in financial difficulties. The Halifax Index reported house prices fell by 3.1% between March and April moderating annual price increases to 2.2% from 2.5%.

The London market is cooling quickly after years of sustained price increases, but the average value of a home is still at a lofty £470,000 compared to the South West average of £270,000 and the decline may be due to many potential purchasers hitting an affordability ceiling rather than wider economic factors.

The reported abating of the market may have an influence on those considering downsizing or indeed those upsizing to larger properties. Downsizing can deliver significant advantages in allowing capital to be released which can be used to top up the pension pot whilst providing a home that is cheaper to run and in a better served location. A recent survey showed that the majority of over-65s would consider downsizing especially to be closer to family members.

Downsizing is not straight-forward however, and the amount of time, energy and money involved in moving home should not be under-estimated. It involves closing the door on memories and a move away from the social circle. There is probably never a good time to move but my experience in advising clients makes me form an opinion that it is better to downsize earlier when the challenges can be tackled with energy rather than later when the task can become too daunting.

As a property agent, I should encourage people to move home and downsizing can be the right thing to do in many cases. Those contemplating a move, however, should be open eyed to the costs involved and these can include costs relating to Stamp Duty, estate agent fees, conveyancing and moving.  

The main challenge in downsizing however is finding a suitable home and a recent survey by Legal & General concluded that just 2% of the UK housing stock was suitable for the elderly. The rate at which retirement homes are being built is 25 times lower than the rate at which demand is growing. Those downsizing are ideally seeking modest two or three-bedroom homes and we are finding this to be the most active sector of the property market. Despite the challenge of raising a deposit, first time buyers are returning to the market encouraged by increasing wages, the Help to Buy scheme and not having to pay Stamp Duty on properties up to £300,000 in value. Competition for suitable homes can be great therefore.

A smaller property does not necessarily carry a smaller price tag especially if in a desirable area. We find this to be the case in Wells which was named by The Times newspaper as one of the top 10 most popular locations for downsizing with demand being for three- bedroom period homes of a value between £350,000 and £400,000. The clear majority of those seeking to downsize would prefer to buy rather than rent and this adds to the competition. With a persistent shortage of homes, it is no wonder that more are considering an equity release in their existing home rather than moving but that may not be the right solution.

We are finding an increasing number of companies offering equity release schemes as well as those who offer to buy your existing home so that you can move more easily. The message must be to proceed with caution so that you and, if applicable, your family are fully aware of what the consequences may be.

If you are considering downsizing, I encourage you to take time to plan, be realistic and take advice from professional advisers such as your solicitor, accountant or agent. It can be a straight-forward experience and the concerns of cost and hassle may be over stated.

Do not be afraid to seek assistance and an experienced, local estate agent should be able to help you sell your existing home, find a new home and assist with the moving process so that it can be a fulfilling experience.

For more information please contact Tom Killen by emailing tom{at}killens{dot}org{dot}uk. Alternatively, please call 01749 671172 or 01275 333993.

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