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Downsizers warned to mind the £100 billion gap

Monday, 19 September 2011 1:26 PM

Home owners looking to downsize over the next five years could be overestimating the amount of equity they will free up by a total of more than £100 billion, according to research from Investec Wealth and Investment.

The study says 3.5 million owners – two thirds of them over 55 - downsized in the last five years and raised an average of £98,000 each.

However, 4.7 million owners planning to buy a cheaper home in the next five years are expecting to make an average of £120,000 each. That implies a shortfall of £22,000 each - a total of £103 billion.

Four out of ten of those who have already downsized ended up spending more than they planned because they were not willing to make as many compromises as they thought.

Location was the main factor cited as a compromise too far, followed by the overall condition and the size of the new property.

Nick Gartland, senior financial planning director at Investec Wealth & Investment, said, “Downsizing may be a popular way to release capital but home owners are often wildly overoptimistic about the amount they will crystallise. This gap between expectation and reality can have a significant impact on their financial circumstances post retirement.”

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