Martin Kinney was staggered when an estate agent valued the six-bedroom house
in Wimbledon, south-westLondon, where he has lived with his family for 31
years. He and his wife, Liz, 63, had just spent £35,000 doing it up and were
curious as to what it would fetch. The answer was £2.75m – quite a leap from
the £48,000 they paid for it. “We were surprised that it had gone up so
much,” says Martin, 68, a retired chartered accountant. “So we just thought,
‘Let’s get on with it and do it.’ ” The Kinneys, who have just put the house
on the market, are typical of their generation. When they moved into the
house, they were newly married and the garden was scorched brown from the
hot summer of 1976. As the years passed, they had two children, Caroline,
now 29, and Claire, 27. They gradually paid off the mortgage, but, since
they liked the house and location, never saw any reason to move – until now.
The boom in property prices during the past decade means the Kinneys are
rattling around in their largest asset. With its three reception rooms, sun
room, parking for four cars and two garages, the 3,000 sq ft house, built in
1953, is too large for the couple; selling would not only allow them to move
into something cosier, it would release money to help their daughters onto
the housing ladder.
“Of course, the children keep saying, ‘You can’t go, you can’t sell the
house,’ ” Martin says. “But there’s no point having the money tied up in
something this big when there’s just the two of us. We don’t use some of the
rooms now.
Alot of people of our ilk do think about doing it, but not many get on and do
it. The main reason for downsizing is to release equity from the principal
home and give money to the children, not Gordon Brown.”
It is also about a lifestyle change. Although they are looking to buy a small
property in London, the Kinneys are “moving our centre of gravity south”, to
the coast. They have sold a smaller holiday home in Lymington, Hampshire,
and this summer bought a four-bedroom Edwardian property in Milford-on-Sea,
in the same county, for £930,000.
The couple waited until after retiring to make the move. Others trade down
once the children have left home, choosing to move into something smaller in
an area they know well.
Take Melanie and Francis Jacques, who have a four-bedroom, 2,088 sq ft house
in West Byfleet, Surrey. Their daughter, Eleanor, 24, and son, Charles, 21,
are both working and sharing a small house of their own nearby, so they feel
it is time to swap four bedrooms for three. They are selling for £1.15m and
looking for somewhere smaller between Woking and Weybridge.
“I know it doesn’t sound as if we are really downsizing, but we are,” says
Melanie, 57, a lawyer. “We moved here 21 years ago, when my daughter was
three and my son was on his way. Our current house is too big for us now. We
are effectively living inside our pension scheme.”
Meanwhile, David Hollis and his wife, Linda, are already enjoying the benefits
of downsizing. Earlier this year, they swapped their 200-year-old
three-bedroom cottage in Horsham, West Sussex, for a three-bedroom new-build
townhouse on a Rydon development in East Grinstead. Like the Jacqueses, they
remained in the same county.
“We are quite happy with the area,” says Hollis, 60, a retired architect and
fine-art teacher. “We had been living in the cottage for 27 years, and felt
it was time for a change. The old place needed a lot of maintenance and
work. Living in a new house puts an end to all that.”
They sold their cottage for £431,000 and, after paying £325,000 for the new
house, as well as moving costs and stamp duty, were left with £90,000 and
not a lot less space.
“We wanted a home with two spare bedrooms so our daughters, who live abroad,
could stay when they come over,” Hollis says. “Being so near Gat-wick also
makes it easy to fly out to them in Dubai and Kuala Lumpur.”
All three couples are members of a golden generation in their fifties and
sixties who have been the main beneficiaries of a near tripling of house
prices in Britain over three decades, much of it in the past 10 years. While
their children, and their contemporaries, are struggling to buy first homes,
the parents have seen their wealth grow and grow, thanks to the surge in the
value of their homes.
Retired households make up almost a third of all owner-occupied homes in the
country; 93% of them own their property outright. Research by Home-wise, a
pensioner property specialist, shows that the oversixties are sitting on
more than £775 billion in equity. Its pensioners’ property price index
reveals that homes belonging to retirees rose in value by almost £7 billion
between July and September alone – the equivalent of £21,282 for each of the
3.9m retired households in the UK.
It is the sheer extent of this housing wealth – especially in London and the
southeast – that has given such force to the recent debate about inheritance
tax. It was prompted by the Conservative party’s pledge, earlier this month,
to raise the threshold for the tax from £300,000 to £1m. This was followed,
a week later, by a counter-proposal from the government, in its prebudget
report, that would make it possible for married couples to pass on the first
£600,000 of their estate without incurring duty.
Yet even the Conservatives’ proposal would leave many people’s heirs facing a
significant tax bill on the death of their parents. And for increasing
numbers of people, this means downsizing now – not just to help their
children, but to take advantage of some of that housing wealth while they
are still alive.
The question is, where to go? Recent years have seen a growing number of
retirement homes specifically aimed at the older generation (see page 9),
many of which are a far cry from the grey, depressing nursing homes of the
past.
Yet rising life expectancy, better diets and improved healthcare means that
today’s sixtysomethings are often far healthier and sprightlier than their
parents were, and feel too young to contemplate life within a community that
caters exclusively for seniors. McCarthy & Stone, a developer of
upmarket retirement properties, says the average age of residents is 76 –
against 74 a decade ago.
The old retirement staple, the bungalow by the sea, also seems to be losing
its allure, although the southwest, the south coast and abroad remain
popular options. Some prefer to move to the centre of London or other
cities, where there are more opportunities to enjoy an active social life.
Most, though, like the Jacqueses and Hollises, stick to familiar surroundings
(even though they might be able to afford a holiday home as well). Research
by the estate agency Savills shows that 38% of clients who are trading down
from homes costing £1m or more do not want to move more than 10 miles away.
Of those opting for a change of scene, 23% move between 10 and 30 miles, and
31% travel further afield. The remaining 8% buy a second home for
investment, with plans to make it their permanent base in later life.
All this presupposes that people are sitting on substantial amounts of equity.
While homeowners with large, expensive properties can trade down and, in
most cases, still have substantial amounts of money left over, those with
more modest homes have far less room for manoeuvre – especially once you
factor in stamp duty, estate agents’ fees and other moving costs, which have
surged in recent years.
Consequently, many find it makes more sense to stay put, even if they would
love to find a way of downsizing that would be worth the money.
Research by Hometrack, the property data company, has revealed how wide the
discrepancy can be: selling a three-bedroom house and buying a two-bedroom
flat in the Royal Borough of Kensington and Chelsea, for example, would
typically release more than £1m of equity. The same exercise would release
only £20,000 in Manchester and £10,000 in Liverpool.
“If you have a £2m house in the home counties, you can afford a cottage in
Devon,” says Richard Donnell, director of research at Hometrack. “But
if yours is a £180,000 terrace house and the flat nearby costs £150,000,
it’s not worth it. Why would you want to live in half the space to release
£30,000, unless you really had to?”
Sampford, in West Byfleet, Surrey, is for sale for £1.15m with Savills;
01932 838000, www.savills.co.uk.
Rydon Homes; 01342 316405, www.rydonhomes.co.uk
