Downsizing is often touted as the simplest way to do this, but it isn’t the only way and people need to be very sure that the figures will stack up before they put their home on the market.
According to Which? the average cost to move home in October 2021 was almost £12,000. This includes estate agent fees, legal fees, house survey, stamp duty etc. The average price of a four-bedroom family property in the UK is £379,995. The average price of a bungalow in 2021 according to Rightmove was £335,419.
After moving costs, there isn’t going to be much left in the pot to help fund retirement, not considering any new furniture or decorating which may need to take place to make the new home “truly yours”.
This is partly due to the fact that bungalow prices jumped by almost a quarter in the last five years with average house prices rising by 16 per cent over the same period.
Highs and lows of bungalows
The costs associated with buying a bungalow aren’t the only stumbling block a buyer could come up against. Not only is there a general lack of housing suitable for later life living but these homes are not necessarily located in the communities that people are keen to remain in or, if they are, they can command a premium that negates the financial benefits of moving.
According to McCarthy and Stone, almost 10,000 new bungalows were built in the year 2000 but this had fallen to 1,833 in 2020. Given the fact that the UK currently boasts 12 million over-65s – a total that is steadily growing as the baby boomer generation ages – this seems counterintuitive, to say the least.
While the emotions and day-to-day practicalities associated with downsizing cannot necessarily be counted in pounds and pence, they do need to be carefully considered.
Indeed, the government is currently actively working to help older people not only engage with the community they live in but receive care, support, and other services at home. As people become older and deal with the health challenges that age brings, the benefits connected to the ability to speak to a long-standing familiar doctor, walk to their local shop where they are recognised and chat to neighbors should not be overlooked.
Shifting focus
In recent years, the government has focused on first-time buyers, although Help to Buy is coming to an end in October, it is the ‘last-time buyers’ that the government now needs to consider.
If a buyer is lucky enough to find a suitable bungalow, in the right area and at the right cost, they may have a battle on their hands to secure it as their new home. Due to the lack of supply and high demand even in today’s cooling property market, buyers may find themselves in a bidding war with one of the other 12 million people looking to enjoy an easier retirement.
For some ‘last-time buyers’, this could mean that they need to purchase a more expensive home in retirement, even if it is smaller in terms of square footage, to meet their needs and desires in later life.
Although the purchase of this new property would cost more in terms of capital cost, by having a more suitably sized property, it can deliver on savings in other areas such as energy bills and council tax. This is currently more important than ever before, especially for those on a fixed monthly income.
There is no doubt that property wealth can help to fund your retirement, and some may be able to find a smaller home in an attractive area at a sensible price. However, for many who want to stay in the same geographical area, or in a popular area for retirees such as along the coast, it doesn’t always guarantee you can free up enough to fund your retirement, even if you are moving from a four-bed detached property to a two-bed bungalow, terraced property or flat.
Downsizing is not the only option
Downsizing should be viewed as an option in later life but not the only option when looking at unlocking property wealth as downsizing, in reality, doesn’t always equate to a lower property cost. This can be dauting for many as they would need to find additional funds to purchase a property in later life.
This is where later life lending can help, as you can fund a property purchase via equity release, enabling older property buyers to bridge this gap. Anyone over the age of 55 should seek advice from a qualified financial adviser to understand their financial options in later life before making a decision on their financial future.
