Bigger isn’t always better
We must support – not shame – older homeowners into downsizing, says Nick Freeth
Retirement downsizing has moved up the property market agenda in the past few weeks, following the recent, controversial comments from Lynda Blackwell, head of mortgages at the Financial Conduct Authority. Lynda believes that the Government should do more to encourage older homeowners “sitting happily in big houses” to downsize and free up family homes, alleviating the current UK housing crisis.
This has sparked fierce debate over the way we view and treat ‘last time buyers’, with various industry commentators weighing in, including Saga and RICS. The former argued that the comments were ‘unhelpful’ and ‘insulting’, while the latter released research last week which showed that encouraging older homeowners to move into smaller houses could free up £820 billion in property assets, or 2.6 million family homes.
It is clear this debate is as emotive as it is economic. Faced with the facts, few could argue that there isn’t a genuine blockage at the top of the market and perhaps the Government’s emphasis should be shifted from first-time buyers to last-time buyers to solve the country’s housing issues. But this shift must be handled with the proper consideration and sensitivity it merits.
In our experience, downsizing is driven by retirees who want security, safety, convenience and companionship in their later years. Rather than forcing, bullying or blaming ‘home blockers’, in order to free up large family homes for the benefit of people who want to live in them, we need to present downsizing as the positive and exciting opportunity it should be.
So it is vitally important that, as part of this debate, we address the human side of the issue.
For anyone who has gone through it, buying and selling a home is a large undertaking. Often complex and undoubtedly time-consuming, it can be especially traumatic for older homeowners, who may have lived in their family home for decades, raised their children in them and can be reluctant to upend their lives and memories. My own elderly mother is a case in point. She lives in a house that is far too big for her on her own, yet she is so daunted by the prospect of downsizing that she probably never will get round to it.
These are just some of the issues we need to address. With over 25 years of experience in the retirement property market, dealing with around 2,500 enquiries each month, we know that in order to make downsizing work, it is crucial to offer empathy and a way forward that suits last-time buyers just as much as first-time buyers. We must make the transition as seamless and easy as possible for older homeowners. Recently, we have seen our part- exchange service becoming increasingly popular among sellers who are looking for a quick and less stressful transaction. This involves exchanging a percentage of the property’s equity for a guaranteed sale within a set time frame, taking away the possibility of collapsed chains.
Yet, we understand that getting the emotional response right is only one part of the puzzle. As the debate rumbles on, there will be serious questions that need to be answered around other issues to do with downsizing. Research by Saga shows that while two-thirds of older homeowners would consider moving home in retirement, they feel unable to do so – either because there are not enough appropriate properties to move to, or because the costs involved far outweigh any benefit.
Cost and availability of stock are two fundamental – not to mention, complex – concerns that need to be addressed. We can produce all the emotional support in the world, but if there are not the right financial incentives in place to support older people to move or the right regulations for retirement home developments to boost stock, this will all be in vain.
While there are no quick-fix answers to these questions, industry figures and policymakers should look into incentives for homeowners and property developers in more detail. With our background in this area, we have a couple of initial thoughts but would welcome further debate and discussion.
For instance, in terms of financial incentives for homeowners, could we consider a special ISA saving product where older homeowners can store freed-up equity resulting from the sale of their home? Can we waive stamp duty on onward, downsized purchases or ring fence released equity against inheritance tax? The latter has, in part, been addressed in the last Budget but is capped at £175,000.
Answering the housing stock question is less simple. Building appropriate retirement properties is the first step, as the UK lags well behind other countries on this front. In the United States, retirement housing accounts for 17% of housing stock; in Australia it accounts for 13%, whereas retirement properties (either as apartments within purpose built sites, retirement villages, or smaller bespoke developments) make up just 2% of the UK’s private housing stock.
With the UK facing the prospect of an ageing population and a worsening housing crisis, do we need to start discussions about how planning regulations for retirement home developers could be relaxed in order to boost this much-needed housing stock?
As an industry, we need to further this dialogue in order to make downsizing work better. From our side, Retirement Homesearch will be working with its partners in the retirement property sector to drive forward these issues and present possible incentives and solutions. Alongside this, we will help to inform the debate to ensure that we do not forget the real people behind these issues.
After all, if we are to truly shift perceptions around downsizing and make it work for last-time buyers, as well as first-time buyers, we must fundamentally change the tone of this debate to focus on people and their needs – not property assets or housing stock.
The Downsized View
Mary Platt, 88, lives in a one-bedroom flat in Highview Court, an assisted-living retirement development in Christchurch, Dorset.
Made up of 55 flats, Highview Court was built in 2008 and is managed by FirstPort. The development is located close to the beaches of Highcliffe, as well as a doctor’s surgery, shops and a park, while the assisted living approach involves 24 hour on-site staff, a restaurant providing one three-course meal a day and laundry service.
Mary, along with the development’s other residents, has access to a number of weekly social activities, including Pilates, cards and games afternoons, a film club, indoor bowls and cream teas. There is also a theatre group, which goes off site to attend local productions, and a monthly Holy Communion service, overseen by a visiting vicar.
In spite of the vibrant social scene, downsizing wasn’t front of mind for Mary before she moved in, but after a speculative visit, she changed her mind. “When I first came here to view the development, I had no intention to buy,” Mary confirms, “but after visiting I thought that this would suit me perfectly.”
Mary speaks about the “positive attitude” among the other residents and the “peace of mind” given to her by the managed properties, although she admits that assisted-living is not for everyone, with some people her age not wanting it and others being better suited to a care home where they receive more practical and physical support.
Despite this, Highview Court is home to two centenarians, “so we must be doing something right,” another resident notes.
Nick Freeth is Managing Director of Retirement Homesearch
