Millions of homeowners looking to downsize their property in the coming years to help fund their retirement have been warned they are likely to have overestimated how much they stand to gain.
According to Investec Wealth & Investment, around 4.7 million homeowners are considering moving to a smaller property over the next five years.
However, the research suggests that many are likely to be left disappointed with the amount of cash they generate.
The study shows that 3.52 million homeowners have already downsized in the past five years, of which two thirds were over 55.
While they, on average, were able to raise £98,000 in equity, the research found those who are planning to buy a cheaper home expect to make £120,000, far more than they are likely to end up with.
Of those who have already downsized, over four in ten (43%) ended up spending more than they initially planned, largely because they were unwilling to make as many compromises as they had originally intended on buying their new home.
When push came to shove, downsizers were least willing to compromise on their new home's location, followed by its overall condition and size.
One in ten (9%) downsizers admitted to spending more because they fell in love with a property that was over-budget.
When looking at the reasons for downsizing, four in ten (40%) were driven to do so because their existing home was too expensive to run while one in five (20%) moved in order to help pay for retirement.
"Downsizing may be a popular way to release capital but homeowners are often wildly overoptimistic about the amount they will crystallise," said Nick Gartland, senior financial planning director at Investec Wealth & Investment.
"This gap between expectation and reality can have a significant impact on their financial circumstances post retirement.
"This study reinforces our own experience with clients in that more often than not downsizing turns into same-sizing, as people find it far more difficult than they thought to move to a much cheaper home.
"The situation is often exacerbated because they allow an insufficient amount to cover the costs of moving. With the housing market remaining in the doldrums, homeowners shouldn't rely too heavily on downsizing – both in terms of being able to sell and buy a new home and in the amount they generate as a result."
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