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The Number of Incentives to Downsize is Rising, But Will The Elderly Oblige?

With two-thirds of housing equity, the over 55s demands must be met. Peter Hemple reports

Homeownership is not a young persons game. Last year, just 0.7% of homeowners in the UK were aged 16-24. This rose to 11.2% for those in the 25-34 age bracket, and 15.4% for those between 35 and 44 years of age. However, those aged 65 and over held more than one-third of the homeowner market, according to a UK mortgage statistics report released by Uswitch on 12 September.
In 2020, of the 24.7m UK dwellings, Uswitch estimates that just under two-thirds (64%) were owner-occupied. By owner-occupied, they are referring to homes that have been bought outright, as well as those which have been purchased with a mortgage. From those homes that were owner-occupied, around 8.8m (36%) were owned outright, with 6.8m (28%) were owned with a mortgage or a loan.

Therefore, while the over 55s own more than 50% of all residential properties in the UK, that does not tell the true story because so many of these homes are owned outright. According to UK financial services firm, Just Group, the over 55s are sitting on net property wealth of £4.4trn, with almost £1bn a day being added to their house prices during the pandemic – from March 2020 to June 2022.

If the data is correct, then the over 55s hold around two-thirds of UK housing equity. Just Group’s communications director, Stephen Lowe, says: “Given over 55s hold the majority of net housing wealth in the UK, it is unsurprising that they will have reaped the biggest rewards from the growth in the market. But as we enter a new economic cycle, this vast storage tank of wealth they have accumulated will inevitably play an important role in their future finances. With inheritance tax thresholds frozen until 2026, rising house prices will likely tip more estates into paying inheritance tax.”

Time to downsize?
The latest English Housing Survey revealed that the over-65s are the least likely to move home, (followed by the over-55s), and more than one-third of over-65 households have lived at their present residence for over 30 years, regardless of whether they are homeowners or tenants. However, the list of possible incentives to move is increasing.

For homeowners there is the above-mentioned risk of slipping into the net to pay inheritance tax if property prices keep rising. Then there are all of those extra bedrooms. The over-65s have 7.4m of them. If the UK government were to favour the stick over the carrot, then instead of offering downsizers the chance of moving without paying stamp duty (carrot), they could simply create a new tax/penalty that homeowners must pay each year for their unused bedrooms (stick). While this tactic is unlikely of course, the more pressing issue for elderly homeowners today is the cost of heating these extra rooms.

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