Down Sizing

Mr & Mrs Clarke have recently started advertising two homes that are targeted at “downsizers” or “last time buyers”. A modern bungalow and a two bedroom in a luxury development. More of these types of homes are required to help older people move out of large homes. A recent article in the Financial Times highlighted the issues that downsizers face.
Everyone wants to help first-time buyers. Numbers of new property owners have reached a 12-year high as the government grants stamp duty holidays and equity loans via the Help to Buy scheme — and the Bank of Mum and Dad has been busy funding deposits. But a new report boldly argues that housing policy needs to focus on “last-time buyers” to stand a chance of solving the UK’s housing crisis.

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Professor Les Mayhew of the Cass Business School believes the key to this is encouraging homeowners in their 50s and 60s to “downsize”, moving out of their family-sized homes to make way for the next generation.
In his report, recently published by the Centre for Study of Financial Innovation, he identifies the UK’s “under-occupation problem”. Older people are not moving out of houses that are too large for their needs, due to the costs of downsizing and a lack of suitable properties. And as the population ages, the impact is going to increase.
“Tackling this issue should be hoisted much higher up the housing policy agenda,” says Prof Mayhew. “By far the biggest increase in housing need will come from elderly couples or people living alone. Without suitable accommodation for them to ‘downsize’ into, they will continue to stay put in family homes. This, in turn, constricts opportunities for young families and first-time buyers.”

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At the same time, there is a shortage of suitable properties for people aged over-55 wishing to downsize. This had led to an increase in under-occupied properties and a shortage of full-sized homes for young families.

Is it the cost of moving or a lack  of suitable homes that is casing this blockage?
A taxing question
Older property owners are likely to have built up considerable equity in their homes, so targeting a tax break at “last-time buyers” could prove controversial. But considering the impact on the overall housing market, Prof Mayhew is surprised the tax incentive to encourage older people living alone in large properties to move has not been considered.Currently, the taxes and fees involved in moving to a smaller property often make it cheaper to stay put.
While first-time buyers pay no stamp duty on properties valued up to £300,000, older people wanting to move to a three-bedroom apartment in a popular area could pay tens of thousands. They also face selling and removal costs.
Prof Mayhew says there is no incentive for older people to give up their family homes — even if the right properties to downsize to were available.
“In truth, the main reason most people don’t move into smaller properties in later life is that there is a chronic shortage of suitable and desirable alternatives — and a lack of support to make a move,” says Dr Rachel Docking of the Centre for Ageing Better (CfAB).
“A tax break is no good if there’s nowhere within 30 miles that you could actually live in. Our ageing population has exposed the shortage of diverse housing options that are suitable for people as they grow older.”
Prof Mayhew argues that the types of homes being built must be better aligned with demand, which is increasingly dictated by the needs of an ageing society.
Taken from Financial Times Lindsay Cook March 8th, 2019
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