Our analysis segments downsizers – those typically selling larger homes to move somewhere smaller and often cheaper – into four distinct subgroups and tracks how their proportions have changed since 2017. It reveals that, proportionately, the two groups that have seen the greatest growth in recent years are those that have prioritised downsizing in value.
The first group are downsizers who are trading down significantly in both size and value – that is, buying a home that costs at least half the price of the one they have sold and has at least two fewer bedrooms. The share of these movers has risen from 16% in 2017 to 25% this year.
And the second group, the proportion of those trading down significantly in value but not size – so buying a home that is at least half the price of their old one but has a maximum of one less bedroom – has soared from 27% in 2017 to 40% now.
Meanwhile, those not freeing up cash have become less active. The proportion of those trading down significantly in size but not value, has dropped from 24% to 18%. These are people buying a home that has at least two fewer bedrooms but is more than half the price of their previous home.
And, the share of the fourth group – those people selling larger homes but not trading down significantly in size or value – has more than halved, from 34% in 2017 to just 16% today.
This all suggests that more people are now downsizing for financial rather than lifestyle reasons.
This picture is enhanced when looking at the share of downsizer moves paid for in cash. Given that downsizers tend to be older on average, cash dominates this segment of the market. However, the share of downsizers paying for their onward purchases in cash has fallen – from 64% in 2017 to 55% so far this year.
The largest and fastest growing cohort of downsizers – that second group who are shifting down meaningfully in value but not size – are the ones who are most likely still to have a mortgage. These are also the people who are most likely to be feeling the biggest squeeze from higher interest rates, so downsizing will probably, in part, begin a little earlier and reflect their ambition to reduce mortgage payments to a more manageable level. The higher running costs and energy bills associated with a larger property are also likely to be a factor.
With interest rates likely to stay higher for longer, this trend is likely to persist. It's also worth noting that we could see more downsizing in future as a consequence of Government policies such as the addition of VAT to school fees from January. Anecdotally, estate agents say more grandparents are now thinking of selling up to release equity to help towards their grandchildren’s education.
The announcements in the Budget regarding the freezing of inheritance tax thresholds until 2030 and subjecting pensions to inheritance tax from 2027 could also prompt more people to downsize to pass on wealth earlier.
