Recent trends in the housing market have shown a significant resurgence in downsizing, as more and more homeowners opt for properties with fewer bedrooms. Our data reveals that 41% of movers are reducing their bedroom count, a considerable increase from 32% in 2022 and 33% in 2019. This spike is the highest we've seen since we began tracking these figures in 2016.
Downsizers had been relatively inactive in the property market over recent years, with factors such as Covid and low incentives to move playing a role. However, 2023 has brought about a change, with high energy costs emerging as a key driving force behind the decision to downsize.
Additionally, with interest rates at their current levels, a growing number of younger downsizers are choosing to move to clear the final years of their mortgage. This trend is reflected in the fact that a record-breaking 71% of downsizers have paid for their new home in cash so far this year, up from 62% in 2022 and 60% in 2019.
Moreover, a slower housing market, like the one we're experiencing in 2023, tends to favour downsizers. This is because they often prefer to find their next home before putting their current one up for sale. In a faster-paced market, such as 2022, sellers are more inclined to accept offers from those ready to proceed immediately.
While downsizers now make up a larger proportion of the market than in previous years, there has also been a slight shift towards them giving up more space. For instance, 59% of downsizing moves resulted in one fewer bedroom, compared to 64% in 2022. Meanwhile, the number of those dropping two bedrooms rose from 26% to 28% and those giving up three or more bedrooms increased from 10% to 13%.
Given that most of the price growth over the past five years has been in larger-family homes, downsizers are now freeing up more equity than ever before.The average buyer who moved to a smaller home saved an average of 29% or £118,000 so far this year.Naturally, the smaller you buy, the more you save.The average downsizer who bought a home with at least three fewer bedrooms saved 53% on their next purchase compared to a 24% saving for someone who only downsized by one bedroom.
Based on these trends, it's safe to say that 2023 is shaping up to be the year of the downsizer. Their resurgence reflects a changing landscape, with high energy costs and a desire to clear mortgages playing key roles in influencing homeowners' decisions. However, the growing prevalence of downsizers can act as a drag on the speed of transactions in the wider market. Downsizers are generally reluctant to break chains by renting in between moves, which can result in extended transaction times throughout the chain.