How Does the Ageing of the Baby Boomers Affect the UK Housing Market?

Grannies live alone in draughty three-bedroom homes while families with several children cram into two bedroom flats. Maybe we can switch things around.

 

An interesting imbalance of home ownership in the UK by age groups suggests there’s a solution present in two problems. That is, ageing Brits have dwindling cash but larger houses while younger, working families lack for homes even as they earn an income and add children to their households. Wouldn’t it work out well if they could switch places?

 

From seniors’ perspectives that might make sense – although, it would perhaps work best if they could live in homes appropriate to their needs, not just any smaller flat. It’s a fact of British demographics that the older side of the Baby Boom generation and those born before the War, aged 65+, now number 11 million. Add to that how one third of the UK population is over age 50. The vast majority of them own their homes, cumulatively valued at £1.23 trillion, but many have homes that are draughty and in need of updating – yet they lack the money to invest in much. In other words many are capital rich and cash poor.

 

This is not to say that all housing shortages can be solved if people just moved to where the right number of bedrooms exists. Indeed the homebuilders and investors, including land fund managers who convert unused UK land to home development, have their work cut out for them.

 

But with millions of homes that are larger than needed and harder to maintain, a partial solution might be in facilitating these progressions. Here are a number of ways that might happen:

 

• Build more age-appropriate senior housing – Less than 3% of new homes being built are designed for the specific needs – physically, and within access to services and social needs – of an aging population. Urban retirement villages, such as those seen in other countries, should be part of the UK’s housing priorities.

 

• Address certain financial/tax issues – The Council of Mortgage Lenders (CML) published a manifesto on the UK’s aging population and how it will affect the mortgage industry. (Clearly, the unleashing of paid-for properties, worth the aforementioned £1.23 trillion, onto the market is a business opportunity for them.) They advocate for the Government to find solutions to “the collision of new mortgage rules and the forthcoming pension reforms.” Further, the CML suggest that in general the country needs to provide for “better pathways between the mainstream mortgage market, lifetime mortgages and downsizing.”

 

• Incentivise renovations – Local authorities incentivise renovations, such as energy efficient upgrades, to varying degrees. Residents of England and Wales can get up to £7,600 back to offset the costs of installing energy efficiency measures (solid wall insulation, new heating systems, etc.). But this could be expanded upon.

 

• Free up land for more building overall – Whether building for seniors or younger people, more land likely needs to be unleashed to accommodate a growing population. This is what investing in real assets is about, to get local councils to approve land use changes where needed, paving the way for improved infrastructure and actual building.

 

It’s ironic that so much focus is on getting younger people onto the property ladder, when in fact many may wish to exit from their top rung.

 

Investors who find land and built property of interest are following a time-honoured tradition, even if the nature of real estate has changed. For objective analysis, contact an independent financial advisor to identify what kinds of assets fit your needs and goals.