The UK housing market has filled the headlines in recent years, with many commentators decrying the stagnation of the sector. Solutions have not been forthcoming, but it is safe to say that the shortage in housing stock requires an honest appraisal, followed by an injection of purpose and innovation. The recent stamp duty holiday afforded to first time buyers, which ended in March, provided a short-term boost to the market for which the Government should feel justifiably proud. While it is a shame that the initiative did not continue, its success begs the question of whether it could be applied to the opposite end of the housing scale. In other words, if first time buyers can be incentivised to buy, why can't older people become incentivised to sell?
The current generation of over 60s are both healthier and wealthier than ever before, and they are also majority homeowners. The most recent ONS General Lifestyle Survey found that more than 60 per cent of 60-64 year olds own their homes outright. This means that the baby boomer generation are sitting on vast sums of housing equity, often having bought at a good time before seeing their investment appreciate considerably over the coming years. While this is good news from an investment perspective, the downside is that many older people find themselves asset rich but ultimately cash poor and therefore unable to meet their needs and ambitions in later life.
Offering a stamp duty exemption to those over 65 would provide a solution to this issue by encouraging older people to consider downsizing to more suitable properties. The benefits could be significant for the individual and at a macro level by providing much needed stimulation to a stagnant housing market. In effect, any stamp duty rebate for downsizing would be rendered cost neutral for the government as it would see valuable housing stock made available for younger generations to purchase, pumping money back in to the sector.
An argument for 'positive downsizing' is the many different benefits it provides - the opportunity to stimulate a stagnant market, a chance to improve retirement income and also and ideal opening to argue for more tailored and appropriate housing. There are too many people, who as they get older, remain in a house that is increasingly unsuitable for their needs, expensive to run and difficult to manage. The house that this generation worked so hard to afford can quickly become a burden in the event of a deterioration of health in later life. And let us not forget that control over how this asset is often taken away from home owners in an emergency, such as a fall or sudden illness.
Despite the obvious advantages of downsizing however, many older people avoid making any decision about their largest asset, their property, because they fear change and are concerned about the financial impact on immediate finances and the inheritance they wish to pass on to loved ones. Incentivising downsizing mitigates these concerns, but it is only one piece of the puzzle. Retirement must be a period of empowerment and more must be done by industry, Government and providers to highlight the range of choices available, such as extra care housing, for people who sell the family home as part of overall retirement planning.
As the first generation to be majority homeowners, collectively holding over £1 trillion in equity, any changes introduced now could see the money currently tied up used to fund a happier and healthier retirement and open up a closed family housing market. This is why the government should consider not only incentivising first time buyers but also those at retirement age to downsize, which has the potential to both mitigate the costs of an ageing population and help younger people to climb the property ladder.
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