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November 6, 2013updated 11 Jan 2016 2:00pm

When downsizing in a property boom, do you stick or twist?

By Spear's

Stick or twist – that’s the question many Londoners are facing, in a market that seems ever rising. I have clients who are ready to downsize, but are considering whether it’s a smart financial decision. They reason that the asset they’re living in is outperforming their much-reduced share portfolio and other investments, so wouldn’t it be prudent to remain in it?

It’s why housing stock remains limited and expectations on price high. I don’t think the bubble is ready to burst, but it may be close to flaccidity. These clients have a good-sized house in Chelsea – they’ve brought up their children there, who are now fledged. It needs a revamp and is much larger than they need. They have a house in Hampshire and one on the Amalfi coast, where increasingly they like to spend spring and autumn, and who can blame them?

While they’d like to release some capital, they’ve witnessed prices skyrocket in the last five years and wonder – as we all do – if they’ll continue. We’ve looked at the figures and they’ve considered taking a mortgage to buy a flat and then rent out their house. That scenario comes with complications, as their house would need a major overhaul to be rentable.

The rustic charm of it may be understood by a purchaser (who would factor in the cost of gutting it) but not a renter – who’d most likely be an American family appalled by everything from the peeling paint to the two bathrooms (which service the seven bedrooms) to the comparatively miniscule fridge and solitary washing machine (there’s no dryer as they hang the clothes up by the antique boiler). It’s hard to explain these demands to people who live quite happily in a place.

I advise they sell, buy something at half the price so they’re still in the market and hand down the leftover few million to their children and avoid death duties. I have a slight fear that they see this as self-serving, though it’s of no advantage to me – but I’m their children’s generation and I’m sure it crosses their mind that all the younger generation have half an eye on funneling down the inheritance.

The fact is we all face the ‘stick or twist’ conundrum over the course of our lives. And it relates to far more crucial matters than our housing arrangements. Do we change jobs? Or leave a job without having another one lined up if we’re not fulfilled? Do we move countries for work, family or possible opportunities?

Do we stay with the person we’re with because it’s familiar and we’re scared of being alone? Or do we jump ship with the optimism of new possibilities? Our life, in short, is a series of questions that come down to the simple question of stick or twist. My clients’ choice is an easy one, for whatever they decide we’ll make work.

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