Growth in older households creates problems for downsizers
Growth is firmly skewed to older households, with those headed by someone over 65 years set to make up 88% of this growth. Those headed by someone under 65 will grow just 3%, while those headed by people aged 85 and over will more than double in that time. London will see a 24% increase in households – followed by the East, South East and South West.
The growth in households is slower than predicted in 2014, at 159,000 more households a year rather than 210,000. Lower birth rates, slower growth in longevity, migration patterns and changes in living patterns have contributed to this slower growth.
Sarah Coles, personal finance analyst at Hargreaves Lansdown says the boom in older households will have consequences for those wishing to downsize: “While many older people will want to stay in their family home, we are also likely to see a boom in demand for housing that’s more suitable for people as they get older. This is likely to include specialist retirement housing, as well as bungalows, more accessible homes, and smaller easy-to-maintain properties.
“Unfortunately, while demand grows, supply is failing to keep pace. According to the National House Building Council, just 2,210 bungalows were built in 2016 – compared with 26,408 in 1986. Modern and accessible flats are also thin on the ground, because according to the ONS, 81% of new properties built in 2017-18 were houses….The trend is likely to be exacerbated where land is particularly expensive and hard to come by – including London and the South East – the areas which expect to see the biggest boom in older households in the coming years.”
She believes those planning to downsize later in life will need to consider their options carefully: “It’s well worth doing your research as early as possible, so you know what you’re working towards, and you aren’t faced with a nasty surprise when the house-hunting begins in earnest.”
Rachael Griffin, tax and financial planning expert at Quilter, says these figures highlight the need to address intergenerational inequality: “Economic well-being figures from the ONS released earlier this year revealed there is a huge gulf in wealth between today’s 60 to 62 year olds and those 30 years their junior, who will make up these future households. According to the statistics, the net household property wealth of those aged 60 to 62 years was six times that of those aged 30 to 32 years during July 2006 to June 2008, however, this difference increased to 17 times by July 2014 to June 2016. While the younger generations will at some point see some of this wealth passed down, with people living much longer and needing extra care later in life, the end sum is an unknown quantity.
“Without rapid change, this generation who are so much worse off than their predecessors, could be facing an impoverished retirement with little in the way of inheritance to draw upon. Just one of the consequences of this, is that these future households will struggle to stump up the cash for any necessary care in retirement. The government needs to swiftly start making some simple alterations to Britain’s tax environment to address intergenerational inequality. Some of these changes include increasing the IHT gifting allowance, which would help wealth trickle down the generations earlier.”
Griffin points out that if the annual allowance had tracked inflation, it would now be permissible to gift £10,932.20 per tax year in 2017, according to the Bank of England inflation tracker. The allowance remains at £3000 per person per year.