Shortage of suitable homes for downsizers
Older people are unable to downsize due to a lack of more suitable, smaller homes.
Although the housing crisis is widely recognised in relation to younger people trying to get onto the housing ladder, the other side of the market may also have challenges to face.
The shortage of suitable homes has meant that would-be downsizers are stuck in properties which are now beyond their needs.
The older generations are more likely to be asset rich and cash poor, therefore, methods such as equity release are required in order to release wealth tied up in a property.
Whilst borrowing against a property may appear to be a viable option, its costly nature can mean that in reality, it is less so.
It has been estimated that 111,000 homes could be introduced to the market if those put off by the cost of downsizing were to sell.
Another key reason behind potential downsizers being deterred is the lack of alternative homes.
Due to space often being rationed on new build land, developers will tend to construct flats and homes aimed at those looking to get onto the housing ladder. Paul Green of travel and financial services group Saga commented on first time buyers being the prime target for developers, who in turn produce homes that may be unsuitable for downsizers.
“Developers have been focusing on two- or three-bedroom flats with young people in mind.”
“If you’re downsizing from a large house, a small two-bedroom starter home might not have enough space for everything you expect to have around you.
“If the Government can stimulate demand with a stamp duty cut, and developers can build properties that are seen as aspirational, more people will move.”
An exemption of stamp duty for downsizers could cost £460million according to Mr Green. However, the increase of available property would encourage younger generations to move and the tax they pay would offset this sum.
Mr Green also highlighted the need for properties to be seen as “aspirational” or appealing to older buyers. Retirement homes, for example, may commonly be associated with a loss of independence, leading to unpopularity within the target market. This unpopularity of retirement homes is evident in Britain; only 1% of people live in one.
Whilst unsuitability of a property is one obstacle for potential downsizers, a desire to stay in the local area is another. Individuals may have lived their whole life in a particular location and built up a strong network of friends as well as family. They are therefore much more inclined to remain somewhere they are familiar with that is also able to provide a web of support.
Where there is space available, some individuals have considered building on their own land in order to remain in their preferred location as well as freeing up their property. However, strict planning regulations mean this can often not be carried out.
For many looking to downsize, one level properties are often the preferred choice. Currently, however, only one out of 63 new homes are built on a single level, naturally meaning demand is high.
Housing Minister Gavin Barwell recently stated that the upcoming housing White Paper may contain reforms aimed to benefit the older generations, including more sheltered accommodation.
Think tank Demos have also suggested a stamp duty exemption in order to reduce the barriers to moving which potential downsizers currently face.