2 Million Over 55S Plan To Downsize: A Risky Business

[TheCountOfNowhere]

Exactly. Plan to downsize to make money then upon realising how much it will be for all the costs, fees and taxes, decide to stay put.

Most likely downsize is a couple of 8' * 2'6" * 6'

My in-laws are a bit like that. It would cost them a wedge to downsize from their massive, well located 5 bed house to a massive garden and all they can find to downsize to is s*** with no gardens miles from any services....so they are staying put.

I must try the line "sell before you miss out" on them the next time I see them.

[arrgee1991]

My in-laws are a bit like that. It would cost them a wedge to downsize from their massive, well located 5 bed house to a massive garden and all they can find to downsize to is s*** with no gardens miles from any services....so they are staying put.

I must try the line "sell before you miss out" on them the next time I see them.

Aside from reducing IHT liability, it doesn't make much sense to downsize.

Moving from a £1million property to a £600K property costs £24K Stamp duty, £12K Estate agent fees (assuming 1% +VAT) and probably another £4K in various other costs. So that is £40K off the £400K "profit".

[fluffy666]

My in-laws are a bit like that. It would cost them a wedge to downsize from their massive, well located 5 bed house to a massive garden and all they can find to downsize to is s*** with no gardens miles from any services....so they are staying put.

I must try the line "sell before you miss out" on them the next time I see them.

My in-laws have a house like that as well..

Although they don't have any plans to move.

I wouldn't mind people doing that - they do own the place, after all - it's when people like that complain about new developments that I have issues..

[Wurzel Of Highbridge]

My in-laws have a house like that as well..

Although they don't have any plans to move.

I wouldn't mind people doing that - they do own the place, after all - it's when people like that complain about new developments that I have issues..

It's in the planning law (density of new developments) that's illegal to build new homes like that.

[slacker]

I wouldn't mind people doing that - they do own the place, after all - it's when people like that complain about new developments that I have issues..

I agree in principal on that - but when I look at this village I live it feels unfair.

Almost all the houses are now owned by boomers and have most of the bedrooms empty at night.

Families have kids crammed in with bunkbeds and no garden.

All the services get terminated as boomers don't use them (school, commuter bus routes, local shop etc.)

[Venger]

Exactly. Plan to downsize to make money then upon realising how much it will be for all the costs, fees and taxes, decide to stay put.

Most likely downsize is a couple of 8' * 2'6" * 6'

My in-laws are a bit like that. It would cost them a wedge to downsize from their massive, well located 5 bed house to a massive garden and all they can find to downsize to is s*** with no gardens miles from any services....so they are staying put.

I must try the line "sell before you miss out" on them the next time I see them.

This argument only works for older owners of lower value homes really. <£300K. Truth of the matter is they're often so complacent, that the "fees" don't really make a dent on what they could get (until other sellers beat them to it by selling for lower prices and dragging down the value of their homes with it)...

You get people here all the time using the 'fees' argument for why older people/individual won't downsize from larger family houses they might be able to sell for upto £1m.

And the complacency again... truth is they still expect even more HPI. Campervanman isn't convinced of HPC, and whilst I accept he isn't interested in what his home is worth, to him it only matters if it can sell for enough so he can by a similar home (not a downsize). I too know of an upsizing couple in their late 50s/early 60s recently.

It is expensive to downsize. Moving down incurs all the moving costs associated with moving up. Selling a £1m property to move into a £600K property will cost over £40K when all fees and taxes are considered. In effect you lose 10% of the potential gain. I don't believe people are refusing to downsize, it's just that they lack any incentive to do so.

The fees, and revealed that also expecting more HPI. The complacency. No incentive for they expect more HPI.

Oh those awful fees again... downsizing from homes where there's just about enough of a trickle of buyers paying £500K-£750K+ to a £250K-£300K.

The alternative view is that wages and salaries become increasingly detached from the calculation of house price affordability and are replaced by the amount of tax revenue that the government are prepared to use to prevent a collapse in prices. There may not be further hpi as in the terms of 1980's hpi but there could well be preservation of current values due to a combination of low IR's and continuing government subsidies. Free housing through hpi+inflation and free housing through artificially low IR's and further taxpayer subsidies both give the buyer of the house a transfer of wealth from someone else to them.

As Lo-fi said:

Lo-fi, on 08 May 2014 - 07:27 AM, said:

Turning down the possibility of £400k equity gains for the sake of £40k fees is either extremely poor maths or somewhat disingenuous (i.e. the fees aren't really the main issue). There are no doubt many legitimate reasons not to move, but that's not one of them.

Edited May 22, 2014 by Venger

[Venger]

Aside from reducing IHT liability, it doesn't make much sense to downsize.

Moving from a £1million property to a £600K property costs £24K Stamp duty, £12K Estate agent fees (assuming 1% +VAT) and probably another £4K in various other costs. So that is £40K off the £400K "profit".

Omg he's at it again !!!

[slacker]

The underlying problem is there is no cost to wealth in this country.

Once you have wealth you get to keep it, you get more influence on what goes on and you massively reduce your living costs.

Whereas people without wealth who depend only on income have to pay more monthly than the wealthy (mortgage or rent) and it becomes ever harder to generate any wealth at all.

These people that over-extending themselves to get on the ladder are likely not paying anything in to pensions - and are not likely to see same HPI as a source of wealth that previous generations have.

[winkie]

Can I ask who the feck is going to be able to afford this housing stock?

Downsizers from London....only they get a bigger house?

So people are downsizing to help fund retirement, why is that? is it worth it? .....could it be they are downsizing to help their children with a house deposit, could it be they are moving in with their childrens family, into the newly built granny annex or new larger home, pulling resourses, care and compainionship together? could it be their children are moving back to live with them or might have to move back to live with them.......why sell, they may decide equity withdrawal could work better for them.......would their children prefer them to do that or downsize?......at the end of the day you either spend it or give it away, you can't take it with you.

[slacker]

Downsizers from London....only they get a bigger house?

This is one of the big perversions, a retired couple of avg earning civil servants from East End can downsize to a small farm around here - which a local working GP couple couldn't dream of affording.

You are creating aspiration around property investment decisions - not around studying hard to get a good job that benefits society.

[winkie]

This is one of the big perversions, a retired couple of avg earning civil servants from East End can downsize to a small farm around here - which a local working GP couple couldn't dream of affording.

You are creating aspiration around property investment decisions - not around studying hard to get a good job that benefits society.

....very difficult to value individual jobs...a GP is imo well paid, better paid than they ever used to be and they have good benefits that come with the job.....a dementia carer or district nurse or social worker are imo just as valuable if you want to make comparisions to who should or should not be paid more or who is more worthy than another worker......

Affording something means repaying debt, creating your own equity and making sacrifices to do that.......choices, buying a nice posh car or sending the kids to private schools or state schools or repaying debt.....

[FreeTrader]

Its how we'll evolve to fit into housing

You may jest...

http://www.foxtons.co.uk/property-for-sale-in-denmark-hill/chpk1412647

[slacker]

....very difficult to value individual jobs...a GP is imo well paid, better paid than they ever used to be and they have good benefits that come with the job.....a dementia carer or district nurse or social worker are imo just as valuable if you want to make comparisions to who should or should not be paid more or who is more worthy than another worker......

I disagree. You have one of the highest paid people in local community unable to afford more than the lowest 30% of priced property in their area - after years of study and success in qualifications - and without enough bedrooms for their kids.

And you have someone who did no post-school studying, got an average salary government job and retired earlier than most who is able to afford property in the top 5% in the area they downsized to - just because they happened to buy at right time / place - nothing to do with how worthwhile their jobs are or what they earned in income.

To make matters worse they have 3 spare bedrooms, buy shopping over internet from Waitrose 30 miles away and use no family services in the community that the occupants of the 4 bed house would normally need so services end up being closed.

What example does this set?

Edited May 22, 2014 by slacker

[dpg50000]

You may jest...

http://www.foxtons.co.uk/property-for-sale-in-denmark-hill/chpk1412647

Shakes head. That's basically just an extension on the side of the adjoining house. Anyone who pay £450K for that wants their head read.

[SpewLabour]

Anyone who pay £450K for that wants their head read.

Well they are voting LibDem....

[Venger]

Downsizers from London....only they get a bigger house?

So people are downsizing to help fund retirement, why is that? is it worth it? .....could it be they are downsizing to help their children with a house deposit, could it be they are moving in with their childrens family, into the newly built granny annex or new larger home, pulling resourses, care and compainionship together? could it be their children are moving back to live with them or might have to move back to live with them.......why sell, they may decide equity withdrawal could work better for them.......would their children prefer them to do that or downsize?......at the end of the day you either spend it or give it away, you can't take it with you.

Equity release has picked up big style recently. Last article I read suggested it was back to 2007 highs. Martin Lewis in Telegraph (27 March 2014) suggested equity release is an expensive option. He suggested perhaps it makes more sense a tickover solution for a few years, whilst properly preparing for downsize.

He knows his audience like I do, and knows they expect even more HPI, thus the complacency about downsizing. An article of the other day was offering Equity Release with "no negative equity guarantee".

Taking £20,000 aged 65 can mean £100,000 is taken from the value of your home after 25 years. As a rough rule of thumb, at 7pc interest, the amount owed doubles every 10 years. So if you must do it, unlike downsizing, leave it as late as possible, and if you can, do it bit by bit.

Of course, if you’ve no dependants you want to leave cash to, this may not be a problem. Even so, leaving it later, and taking bits a chunk at a time leaves you more to play with.

Otherwise it’s an expensive way to unlock your home’s value. That’s why I’d again note – do explore downsizing earlier. While you may argue house price inflation means it’s worth holding on, that won’t help you if you never get round to it.

Question is whether there is enough upsizers, to pay anything like they expect to get for such family homes? Some may accept lower prices, and that affects value of other similar properties. If we get a tick up in supply, more sellers needing to sell, it might get interesting.

Stock 'lowest for almost a decade', says NAEA

Monday, 24 March 2014

Association members had an average of 45 homes to sell in January but only 43 in February - the fifth successive monthly fall and approaching the 2004 ‘low’ of just 40.

[Wurzel Of Highbridge]

Do people want to downsize? What's the logic apart from monetary?

I guess the idea is to reduce bills and maintenance costs, but as a percentage of income these are quite low compared to past times.

It seems logical to me that everyone would like a bigger better house, with more insulation, built in storage etc. What is stopping everone from having increased living standards? The diddly little bit of land housing takes up is a non issue.

The right way forward would be for everyone's living standards to improve and that means bigger, better and newer houses. Whilst everyone is wasting time squabbling about not being allowed to build x,y,z living standards are declining.

[winkie]

I disagree. You have one of the highest paid people in local community unable to afford more than the lowest 30% of priced property in their area - after years of study and success in qualifications - and without enough bedrooms for their kids.

And you have someone who did no post-school studying, got an average salary government job and retired earlier than most who is able to afford property in the top 5% in the area they downsized to - just because they happened to buy at right time / place - nothing to do with how worthwhile their jobs are or what they earned in income.

To make matters worse they have 3 spare bedrooms, buy shopping over internet from Waitrose 30 miles away and use no family services in the community that the occupants of the 4 bed house would normally need so services end up being closed.

What example does this set?

I have always said and I do agree the young today have picked the short straw with life timing.....but the solution is not to covet what others happen to get through no fault of their own, for being at the right place at the right time, all they wanted was a small terraced home that they could afford knowing it will take many years of working to pay for it..... best not to blame the oldies for this, blame the system....study is something you choose to do hoping it will improve your life chances and opportunites, there are people that love to study, in fact many who do it, do it not for a certificate at the end but because a certain subject fasinates them, they have a passion for that particular subject, learning about things and people goes on throughout life......nothing in life is guaranteed, no certificate or house will guarantee an income or your health.

[19 year mortgage 8itch]

Do people want to downsize? What's the logic apart from monetary?

I guess the idea is to reduce bills and maintenance costs, but as a percentage of income these are quite low compared to past times.

It seems logical to me that everyone would like a bigger better house, with more insulation, built in storage etc. What is stopping everone from having increased living standards? The diddly little bit of land housing takes up is a non issue.

The right way forward would be for everyone's living standards to improve and that means bigger, better and newer houses. Whilst everyone is wasting time squabbling about not being allowed to build x,y,z living standards are declining.

The logic is that you don't want to be shunned in the future, just for being old.

[Venger]

I have always said and I do agree the young today have picked the short straw with life timing.....but the solution is not to covet what others happen to get through no fault of their own, for being at the right place at the right time, all they wanted was a small terraced home that they could afford knowing it will take many years of working to pay for it..... best not to blame the oldies for this, blame the system....study is something you choose to do hoping it will improve your life chances and opportunites, there are people that love to study, in fact many who do it, do it not for a certificate at the end but because a certain subject fasinates them, they have a passion for that particular subject, learning about things and people goes on throughout life......nothing in life is guaranteed, no certificate or house will guarantee an income or your health.

No one is blaming older owners. However don't bracket them up as all terrace living humble owners. Many own the quality family home housing stock.

Let them live in such homes to their dying day, 5 bedrooms empty, if they choose. Yet time to make some changes to Winter Fuel Allowance, free bus/rail/tram/tube, when owner has high value assets.

[Venger]

Do people want to downsize? What's the logic apart from monetary?

I guess the idea is to reduce bills and maintenance costs, but as a percentage of income these are quite low compared to past times.

It seems logical to me that everyone would like a bigger better house, with more insulation, built in storage etc. What is stopping everone from having increased living standards? The diddly little bit of land housing takes up is a non issue.

The right way forward would be for everyone's living standards to improve and that means bigger, better and newer houses. Whilst everyone is wasting time squabbling about not being allowed to build x,y,z living standards are declining.

Monetary should be a real incentive to downsize, given the outrageous values houses have reached. It shows just how far the inequality gap is between old and young.

There's no point building your homes in this market. Political backed developers hold all the power, making record profits too.

Self-build numbers diminishing, for no land-owners will sell a plot below "what it is worth". (Mostly fortunes, connected to outrageous property values).

Sign on to that self-build scheme run by Gov, and you might be lucky to get a plot for £50K in Stoke on Trent, where in my view the build land should be valued at £100 per plot post-ponzi.

You can't get increased living standards without having a crash first.

[winkie]

No one is blaming older owners. However don't bracket them up as all terrace living humble owners. Many own the quality family home housing stock.

Let them live in such homes to their dying day, 5 bedrooms empty, if they choose. Yet time to make some changes to Winter Fuel Allowance, free bus/rail/tram/tube, when owner has high value assets.

What are you saying?.......are you talking size of house or where the house is situated....big difference.

Take for example a house like Free Trader displayed in SE5.....hard to downsize from that, and why would someone want to if their friends, family and connections are close by, a house they have lived in for many years....why would they want to up-sticks and move away to a place that is totally alien to them when they don't have to, just because someone told them it was worth lots of money?

[arrgee1991]

Good God. That sounds like a dry run for the reasoning behind stopping stamp duty for older people....all for the good of the young and access to housing you understand,

Even with no stamp duty the cost of moving is expensive. People may plan to downsize to release the value in the bricks and mortar, but rarely go through with it. Downsizing a property to ensure a married couple's assets are worth less than £650K is the real benefit for those who inherit the estate.

I see a future where mortgage deals will be available to people over 75, who will make the payments from their annuity/drawdown income or alternatively just take equity release as they still won't have paid off their original mortgage.

[Venger]

What are you saying?.......are you talking size of house or where the house is situated....big difference.

Take for example a house like Free Trader displayed in SE5.....hard to downsize from that, and why would someone want to if their friends, family and connections are close by, a house they have lived in for many years....why would they want to up-sticks and move away to a place that is totally alien to them when they don't have to, just because someone told them it was worth lots of money?

Click on the photos for it. Not exactly any sign it's an older home-owner living there.

http://www.foxtons.co.uk/search?property_id=896186&resource=thumbnails&search_form=map&search_type=SS&submit_type=search

There's no point arguing this when it keeps coming back to older owners ALREADY only living in small flats, and humble terraces - not large family homes by themselves, worth fortunes. And it being London focused.

I know an older woman in her 70s in London living alone in a 5 bed house (well she has a lodger) but also 5-6 other investment houses as well, from marriages, and inheritance down the years. When I looked up her postcode, Edwardian house few houses down was on market for £1.25m.

It will happen anyway. One tilt of the market and someone will accept lower prices for the mid-to-high housing stock, bringing all values down. So few can afford to upsize, owners are under siege. It's only because conditions are such that there is a complacency about HPI of such homes going up in value, that more sellers haven't come to market.

They're also building retirement villages, although ridic (imo) prices, in London. At least the market knows downsizers have homes worth fortunes, they could sell and buy their overpriced London retirement village places from £600K - but we have this argument that their equity gains (wealth) isn't real money.

http://www.express.co.uk/news/property/476243/Retirement-villages-are-transforming-as-urban-downsizers-boost-the-market

[19 year mortgage 8itch]

Even with no stamp duty the cost of moving is expensive. People may plan to downsize to release the value in the bricks and mortar, but rarely go through with it. Downsizing a property to ensure a married couple's assets are worth less than £650K is the real benefit for those who inherit the estate.

I see a future where mortgage deals will be available to people over 75, who will make the payments from their annuity/drawdown income or alternatively just take equity release as they still won't have paid off their original mortgage.

Your alternative is to stay there and die lonely.

Stamp duty doesn't look so bad now does it?