The financial case against downsizing

Retirees hoping to enjoy the fruits of their labour in later life are facing a new problem – downsizing their home. Once a guaranteed way to free up some spare cash, some pensioners are now finding it’s actually costing them to find a smaller space. It comes as property sales are 9 per cent down on last year, according to Zoopla, and 30 per cent of homes that have been up for sale since April remain unsold without a price reduction. Slow market activity has pushed people like Sandy Boden, 78, to accept a lower than expected price when selling up. Sandy decided to sell her four-bed home following the passing of her husband, Bill. Shorts After 40 years of happiness in the detached property in Bromley, south London, she realised the large garden was too much to maintain by herself after Bill died from cancer in 2024. But after getting diagnosed with breast cancer just five days before Bill’s death, Sandy was unable to think about moving house while she underwent chemo and radiotherapy. By September 2025 she began to feel better and thoughts of moving to a smaller, more manageable house returned. “I could not bear to see the house I’d lived in for 40 years go to rack and ruin because I couldn’t maintain it like my husband had done,” said Sandy, a retired IT trainer. “I knew it would depress me terribly to stay there because everywhere I turned there was work my husband had done on the place.” Sandy started looking for properties in the same area so she could remain close to friends, when her sister-in-law called to say she’d spotted a nearby bungalow. “It was light, clean and reasonably modern. It had a smaller garden, was close to the bus stop and in a cul-de-sac,” she said. Sandy put her house up for sale, but interest was thin on the ground because it wasn’t close to shops, schools or a railway station. Her estate agent suggested putting her property into an auction to drive up interest. When Sandy Boden, 78, downsized it ended up costing her money Sandy’s struggle to sell is being felt across the country. Helen Pierson, director at mortgage brokerage MAB New Homes, said: “It’s a buyer’s market and you will put people off if your price looks unrealistic compared to others in your area. Most sellers can expect offers of 5-10 per cent below the asking price.” Desperate not to lose the bungalow she had fallen in love with, Sandy upped her offer by £5,000 so the sellers would take it off the market, and decided to try an auction, even agreeing to pay her buyer’s £25,000 auction fees. “I couldn’t imagine myself finding anywhere else as nice, so I did what I did to make it work,” she said. Sandy sold her house for £690,000, paying £680,000 for her new home, where she moved in March. While downsizing did not free up a lump, she says cheaper council tax, utility bills and insurance, and no need for a gardener, saves her £121 a month. “It would have been nice to free up some equity by downsizing, but it was not the main motive,” said Sandy. “I didn’t want to stay in a house and watch it fall down around me.” Those planning to downsize to a new-build to save on maintenance and energy bills – they’re £420 a year cheaper than older properties, according to the Home Builders Federation – could use the builder’s assisted move scheme. Typically offered by larger developers (but not on every plot), this is where the builder helps you secure a quicker sale so you can buy a home from them more quickly. Some will even pay the estate agent’s commission and marketing costs. Alternatively, selling your home and renting while you find your perfect pad could strengthen your negotiating power. Cash buyers are highly prized for their ability to complete quickly and can therefore drive a harder bargain. However you choose to sell, if you’ve been living in the same house for decades, it’s likely to need a refresh and declutter to catch the eye of a younger demographic. Professional property stager Linda Webb, founder of Refresh and Impress, often works with downsizers to get their homes ready for sale. “After walking around the same home every day for decades, owners become blind to things that need fixing or modernising,” she said. “Although they may not bother you, they’ll be immediately noticeable to any buyer.” Taking photographs of your rooms and looking back at them objectively is one way to get a different perspective, she suggests. Small alterations such as neutral paint or modern wallpaper can help, but there’s no need to invest in expensive renovations or a complete redecoration. What are the options? If your move is financially motivated – for example, to repay a mortgage or free up equity to support your retirement – you may need to find a much smaller property, depending on where you live. Free of financial pressure with savings left behind by her husband, Sandy was able to downsize from a four-bed detached property to a three-bedroom bungalow in the same London borough. However, analysis from estate agency Hamptons shows movers who want to clear a mortgage balance of £116,000 – the average remortgaging balance of an over 55-year-old – would need to make a more significant change. For example, in London, the owner of a three-bedroom detached house would need to downsize to a two-bedroom flat to clear the debt. In the East Midlands, the minimum move required would be to a three-bed terrace while owners in the North East, North West, Yorkshire and The Humber and Wales could purchase a two-bedroom semi and be mortgage-free. Finding a suitable home to downsize to is a challenge. A survey carried out by Family Building Society revealed that 58 per cent over-65s would consider moving to a smaller home in later life, but 54 per cent said a lack of housing options were a barrier. Bungalows are often the most desirable downsizing option but are in desperately short supply. According to the National House-Building Council (NHBC), only 1,285 new-build bungalows were registered in 2024 compared to 34,706 detached homes. James Cobb, chief executive of Freedom Living, a retirement village operator, said: “The key word is ‘suitable’ in the housing conversation – no one’s really focusing on the type of housing we actually need.” Retirement villages aren’t as popular as they are in the United States, for example, but are gradually growing in number. Knight Frank analysis of Elderly Accommodation Counsel data shows the number of homes in retirement villages stands at 92,810, up 9.5 per cent on 2022. Retirement operators have monthly service charges for the amenities on site and an exit fee, which is a percentage of the property’s value on sale. This money is used to bring the property back to a sellable condition and reimburses any deferred management fees. Cobb says downsizers should always visit the village before signing any paperwork to get a feel for the community and services on offer and ask for a breakdown of the fees, why you’re being charged them, and what they cover.