Trading a home in the bustling city centre for one in a quieter, more spacious countryside, was a key characteristic of the housing market during and immediately after the pandemic. This great migration contributed significantly to some of the most heated markets seen since 2007. Yet one group appeared relatively un-wavered by this migration shift: downsizers, or those selling their larger home and buying a smaller one.
However, post-Covid, the dial has shifted and we now think that older downsizers currently make up a record share of people trading in the bright lights of the city for suburbia or the countryside.
After hitting a high of 39% in 2021, the share of first-time buyers and movers quitting cities for the country dropped dramatically to 12% in 2022. This year, it has recovered slightly to 18%. By contrast, Covid made relatively little difference to the preferences of older movers. The share of non-downsizers moving to the country stood at 31% in 2020 and 33% in 2021. However, downsizers’ country relocations have since increased, rising to 34% last year and to 36% in 2023.
Indeed, downsizer moves have accelerated overall since the recent cooling of the overheated pandemic market; as during such a frenzy, taking the time to line up what could be a final move can prove much more difficult. As a result, the share of total moves made by a downsizer dropped from 32% in 2020 to 24% in 2021 and hit a low of only 16% in 2022.
However, this year, the proportion has bounced back markedly, with 28% of all moves being made by a downsizer. The charge is being led by the most expensive markets: so far this year, 35% of London moves have been made by downsizers, with 33% in the south-east.
While downsizers are now buying smaller properties with fewer bedrooms, some have taken the opportunity to upsize in value - spending the same or even more on their new home. In 2018, this kind of move made up only 15% of the total, but now accounts for almost a quarter (23%). Essentially, this means these downsizers are buying a smaller home in a more desirable area, with the move being driven by the desire to live in a more manageable property, rather than by the need to free up large amounts of cash.
Given that today’s downsizers have benefitted from years of house price inflation and are, on average, much more affluent than previous generations, it’s likely that this group will continue to grow in size.
Due to high mortgage rates, which mean it is now less viable to borrow into old age, the majority of downsizer purchases are being made in cash. The proportion of cash downsizer purchases has risen steadily, from 60% in 2020 to 68% this year. However, we would expect that as interest rates start to stabilise, much like with everyone else, there will be an increase in the share of older buyers purchasing with a mortgage.
The trend of opting for smaller properties has extended to all buyers recently. High mortgage rates and stretched affordability has meant that the share of first-time buyers and movers buying homes with three or more bedrooms has decreased since the height of the pandemic. This is serving to underpin the values of flats and smaller homes, while larger homes are more likely to see declining prices.
However, there hasn’t been such a shift in preferences among investors – indeed, there has actually been a small uptick in landlords buying homes with three or more bedrooms this year. Likely driven by the slowdown of the market, helping investors feel they can get better value than they would have been able to last year.