Alan Cleary - Managing Director of Precise Mortgages
A report1 by the Centre for the Study of Financial Innovation has cast further light on one of the housing market’s longer term and most challenging trends – how we deal with housing an increasingly ageing society in the UK.
There are a number of contributing factors to this growing crisis, the report suggests, with changing occupancy patterns as multi-generation households have dwindled and older ones increased being one of the biggest. The report finds the average household size has fallen from 2.48 in 1980 to 2.36 in 2018, largely due to the ageing population.
While a growing population inevitably means that more homes must be built, just as pressing is the need to align housing supply with actual household needs. I won’t comment on how policy could be adjusted to support more, older households, but I will say that these findings chime with our own sense of the market - that there is often a mismatch between the type of homes available in certain locations and the type of homes needed.
We often talk about the bridging market in terms of the unregulated deals done to support refurbishment and bringing investment properties back into the market – it’s a vital role played by the sector. But there is also a significant wedge of the market that falls into the regulated space and this is particularly relevant in light of the report’s findings.
Of those regulated deals we write, a growing number relate to the downsizing conundrum. Older couples whose adult children are starting their own families are often keen to move into smaller homes closer to their kids and grandchildren. Yet there is a shortage of this type of housing – often two-bedroom, accessible and with outside space - in areas with jobs and good schools.
Selling off larger family homes, at higher values and the consequently higher stamp duty costs, takes longer than shifting two-bed flats, which have a much broader demand base of landlords, young professional couples and older couples.
This can be a hugely frustrating experience for people in this situation. When they find their perfect downsized home, they don’t want to be stuck waiting around for the sale of their previous home for months. They want (and often need) to secure it and this is where bridging is increasingly stepping in.
The challenges highlighted by the report are not new. The industry has been aware that the number of older homeowners – including those who must remain borrowers for more of their lives - is growing. It is a complex picture - it is not simply a function of society’s ageing. The fallout from endowment mortgages, the lending boom in the early 2000s on interest only terms and the Mortgage Market Review affordability assessments at a time when very low interest rates have made annuities less attractive as a source of income in retirement – all these have made the landscape that much harder for older homeowners to navigate.
The research is a welcome reminder that a healthy housing market means more than just making it easier for first-time buyers to get a foot on the ladder. But there are options available for last-time buyers who need to make the move to more convenient accommodation sooner rather than later – they just need a good broker to help them do it.
Source: 1 https://www.propertywire.com/news/uk/think-tank-says-that-just-building-more-home-is-not-the-solution-to-the-housing-crisis/