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The true cost of downsizing

The true cost of downsizing

Category: Mortgages
11/01/2017

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Downsizing may be a way to free up cash once the kids have flown the nest, but it's easy to forget that it still costs a fair amount to pull off – an average of £17,843, in fact.

That's according to research from online estate agent OwnerSellers.com. Their figures are based on downsizing from a typical detached family home in England worth £381,211 to an average two-bedroom apartment for £268,174, which would free up £113,037 – but that's before additional costs are taken into account.

The two highest downsizing costs were found to be estate agency fees, which are typically 1.8% of the sale price (equating to £8,234, including VAT) and stamp duty (£5,909). Other expenses include conveyancing fees (£2,050), a survey home buyer's report (£600) and removals/packing (£1,050), which can all add up to an eye-watering sum.

As expected, England's most expensive region for downsizing costs is London, where a family home clocks in at £994,931 (and would attract agency fees of £21,491), while a flat at an average cost of £492,815 would attract stamp duty of £17,141. After other expenses of £3,700 have been factored in, it leads to a total downsizing bill of £42,332.

At the other end of the scale, the East Midlands was found to be the cheapest region in terms of downsizing costs, with estate agency fees of £5,472 (based on an average family property worth £265,820) and zero stamp duty costs (given that an average two-bed flat costs £117,082, below the stamp duty threshold), which when combined with the additional expenses bill of £3,700 adds up to £9,442.

Unfortunately, the sheer cost of downsizing makes it prohibitive for many, which could be why so few family homes are coming onto the market."Extortionate estate agency fees and stamp duty combine to make downsizing hideously expensive," said Rupert Cattell, CEO of OwnerSellers, "and this is even before you start adding in other key costs such as surveys, removal fees and legal fees.

"Stamp duty still presents a major cost, particularly for those living in London, South East and East of England, and continues to deter people from downsizing. This is causing a bottleneck in the family homes market, preventing growing families from taking the next step up the property ladder and fuelling the imbalance in the market. One way to limit this is to move to a cheaper area, but this still leaves a large estate agency bill for selling the family home."

So what can you do to reduce the cost of downsizing? Well, one option could be to use an online estate agent, many of whom are fee-free, or at least offer a service that's far cheaper than their high street counterparts. This could reduce your moving costs by thousands of pounds, as could finding a new home that sits below some key stamp duty thresholds (easier said than done in many areas, but it could be possible).

However, even if these options aren't viable, it's worth pointing out that you'd still be left with some £95,194 after the downsizing costs had been factored in (based on OwnerSeller's figures), which is a pretty healthy sum by anyone's standards. Then, if you need a mortgage to fund your move, making sure you've got the cheapest rate possible will go a long way to shoring up your finances for the future, so check out our mortgage Best Buys to make downsizing as financially lucrative as possible.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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